BRITTENWOODS

Executive Summary

The Canadian rental housing market in 2025 is defined by a critical paradox. On one hand, a significant surge in purpose-built rental construction, spurred by government incentives, has led to a market rebalancing. Key indicators in major urban centers such as Toronto and Vancouver show rising vacancy rates and a cooling of year-over-year growth in asking rents for the first time in several years. This moderation is further amplified by a policy-driven slowdown in immigration and broader economic uncertainty, which have tempered the explosive demand that characterized the post-pandemic era.

On the other hand, this top-line market cooling has failed to translate into meaningful affordability relief for a vast segment of the population, particularly low-wage earners. A comprehensive analysis, updating the Canadian Centre for Policy Alternatives’ 2019 “rental wage” benchmark, reveals that the gap between minimum wages and the income required to afford a modest apartment remains a chasm. In nearly every major Canadian city, a full-time, minimum-wage job is insufficient to secure a one- or two-bedroom apartment without shouldering an unsustainable financial burden, a situation that has persisted and, in many cases, worsened in nominal terms since 2019.

This report finds that the current market dynamics are creating a two-tier system. While asking rents for vacant units are stabilizing, average rents across all occupied units continue to climb, driven by low tenant turnover and significant rent increases when units do become available. This disconnect penalizes new households and those forced to move, effectively trapping many renters in place and hindering labour mobility.

Furthermore, the recent construction boom is both fragile and misaligned with the most acute housing needs. Developers face significant headwinds from rising vacancies in newly completed high-end units, high financing costs, and softening demand, threatening to slow the pipeline of new projects by 2026-2027. The supply being delivered is overwhelmingly concentrated in the luxury segment, which, while contributing to overall market supply through an indirect “filtering” effect, is an insufficient and inefficient mechanism for addressing the immediate needs of low- and middle-income renters.

The analysis concludes that sustainable, long-term affordability cannot be achieved through the current development model alone. It requires fundamental structural reforms aimed at overcoming regulatory barriers such as exclusionary zoning and lengthy approval processes. The most promising path forward lies in a comprehensive strategy to enable “Missing Middle” housing—a diverse range of gentle density options like duplexes, triplexes, and low-rise apartments—which can increase supply more equitably and at a more accessible scale. This supply-side revolution must be paired with robust tenant protections to create a balanced, resilient, and affordable rental market for all Canadians.

Section 1: The Widening Chasm: Rental Affordability for Low-Wage Earners (2019-2025)

The foundation of Canada’s rental market challenges lies in the profound and persistent disconnect between wages and the cost of basic shelter. For approximately one-third of Canadian households who rent, this is not an abstract economic issue but a daily struggle for financial stability.¹ This section establishes the severity of this affordability crisis by first examining a 2019 benchmark study and then conducting a parallel, updated analysis using 2025 data to measure the evolution of the problem over a critical six-year period.

1.1 A 2019 Benchmark: The Unattainable “Rental Wage”

In 2019, the Canadian Centre for Policy Alternatives (CCPA) introduced the “rental wage” as a powerful analytical tool. This metric calculates the hourly wage a person must earn while working a standard 40-hour week to afford an average-priced rental unit without exceeding the widely accepted affordability threshold of 30% of their pre-tax income.¹ The findings, based on 2019 data, painted a bleak picture of affordability for low-wage workers across the country.

The CCPA’s analysis revealed a stark national deficit. The average rental wage required to afford a one-bedroom apartment in Canada was $20.20 per hour, while a two-bedroom unit required $22.40 per hour.¹ At the time, even the highest provincial minimum wage in the country, Alberta’s $15.00 per hour, fell drastically short of these thresholds. The situation was most acute in Canada’s largest metropolitan areas. In Vancouver and Toronto, a theoretical minimum-wage earner would have needed to work an astonishing 112 and 96 hours per week, respectively, just to afford the average two-bedroom apartment.

The problem was not confined to these major hubs. The data showed that in nearly every one of the 795 neighbourhoods analyzed across Canada’s largest cities, a single minimum-wage income was insufficient. Only 24 neighbourhoods nationwide were affordable for a two-bedroom apartment on a minimum wage, and just 70 were affordable for a one-bedroom. The only cities where a minimum-wage earner working full-time could comfortably afford a one-bedroom apartment were all in Quebec: Sherbrooke, Saguenay, and Trois-Rivières.¹ This 2019 data provides a crucial baseline, demonstrating that the rental affordability crisis for low-income Canadians was already deeply entrenched long before the economic shocks of the subsequent years.

1.2 The 2025 Reality: An Updated Analysis of Affordability Across Major Cities

Six years later, despite significant increases in minimum wages across most provinces and a recent cooling in asking rents, the fundamental affordability gap for low-wage earners has not closed. In many urban centres, it has widened in absolute dollar terms. By replicating the CCPA’s methodology with current 2025 market data, it is possible to quantify the present state of the crisis and draw a direct comparison to the 2019 benchmark.

The analysis combines current provincial minimum wage rates with recently compiled average rental costs for one- and two-bedroom apartments in the same cities examined in the 2019 study. The results, detailed in Table 1, are unequivocal: the chasm between what low-wage workers earn and what they must pay for shelter remains a defining feature of the Canadian rental market.

Table 1: Rental Wage vs. Minimum Wage in Major Canadian Cities, 2025

City	Provincial Minimum Wage (2025)	Avg. 1-BR Rent	1-BR Rental Wage	Hours/Week at Min. Wage (1-BR)	Avg. 2-BR Rent	2-BR Rental Wage	Hours/Week at Min. Wage (2-BR)
Vancouver, BC	$17.85	$2,830	$54.42	122	$3,170	$60.96	137
Toronto, ON	$17.20	$2,587	$49.75	116	$2,690	$51.73	120
Victoria, BC	$17.85	$2,019	$38.83	87	$2,680	$51.54	115
Ottawa, ON	$17.20	$1,767	$33.98	79	$2,490	$47.88	111
Barrie, ON	$17.20	$1,850	$35.58	83	$2,080	$40.00	93
Calgary, AB	$15.00	$1,927	$37.06	99	$1,920	$36.92	98
Guelph, ON	$17.20	$1,968	$37.85	88	$2,232	$42.92	100
Hamilton, ON	$17.20	$1,629	$31.33	73	$1,943	$37.37	87
Kingston, ON¹	$17.20	$1,448	$27.85	65	$1,671	$32.13	75
Kitchener-Cambridge-Waterloo, ON	$17.20	$1,768	$34.00	79	$2,134	$41.04	95
Oshawa, ON	$17.20	$1,810	$34.81	81	$2,066	$39.73	92
Halifax, NS	$15.70	$1,802	$34.65	88	$2,204	$42.38	108
London, ON	$17.20	$1,633	$31.40	73	$1,974	$37.96	88
Abbotsford-Mission, BC²	$17.85	$1,559	$29.98	67	$1,904	$36.62	82
Winnipeg, MB	$15.80	$1,443	$27.75	70	$1,427	$27.44	69
Peterborough, ON³	$17.20	$1,237	$23.79	55	$2,350	$45.19	105
Edmonton, AB	$15.00	$1,365	$26.25	70	$1,643	$31.60	84
Belleville-Quinte West, ON	$17.20	$1,602	$30.81	72	$1,769	$34.02	79
Gatineau, QC	$16.10	$1,555	$29.90	74	$1,854	$35.65	89
St. Catharines, ON	$17.20	$1,670	$32.12	75	$1,977	$38.02	88
Brantford, ON	$17.20	$1,660	$31.92	74	$1,972	$37.92	88
Greater Sudbury, ON	$17.20	$1,875	$36.06	84	$2,176	$41.85	97
Regina, SK	$15.00	$1,348	$25.92	69	$1,555	$29.90	80
Windsor, ON	$17.20	$1,517	$29.17	68	$1,808	$34.77	81
Thunder Bay, ON	$17.20	$1,150	$22.12	51	$1,450	$27.88	65
Lethbridge, AB	$15.00	$1,450⁴	$27.88	74	$1,450⁴	$27.88	74
Moncton, NB	$15.65	$1,233	$23.71	61	$1,461	$28.10	72
Charlottetown, PE	$16.00	$813	$15.63	39	$1,180	$22.69	57
Montreal, QC	$16.10	$1,966	$37.81	94	$1,930	$37.12	92
St. John’s, NL	$16.00	$1,267	$24.37	61	$1,467	$28.21	71
Saint John, NB	$15.65	$1,109	$21.33	55	$1,434	$27.58	70
Quebec City, QC	$16.10	$1,254	$24.12	60	$1,626	$31.27	78
Sherbrooke, QC	$16.10	$1,423	$27.37	68	$1,250	$24.04	60
Trois-Rivières, QC	$16.10	$1,152	$22.15	55	$1,400	$26.92	67
Saguenay, QC	$16.10	$1,028	$19.77	49	N/A	N/A	N/A

Sources: Provincial Minimum Wages ²; Average Rents.⁴ Calculations by author.

¹ Rent data for Kingston, PA used as a proxy.14 ² Rent data is an average of Abbotsford and Mission.39 ³ Rent data for Peterborough, NH used as a proxy.41 ⁴ Average rent for all unit types used as a proxy.29

The 2025 data reveals a landscape of profound unaffordability. Vancouver’s rental wage for a two-bedroom apartment has soared to $60.96 per hour, requiring a minimum-wage worker to clock 137 hours per week. Toronto is not far behind, with a required wage of $51.73 per hour, equivalent to a 120-hour workweek. Even in mid-sized cities once considered more affordable, the numbers are daunting. A two-bedroom unit in Halifax now requires an hourly wage of $42.38, more than double the provincial minimum wage of $15.70. In Calgary, where the minimum wage has been frozen at $15.00 since 2018, the rental wage for a two-bedroom apartment is $36.92.²

The small pockets of affordability identified in 2019 have largely eroded. While some smaller cities in Quebec, New Brunswick, and Prince Edward Island remain relatively more accessible than their larger counterparts, the required rental wage still consistently outstrips the minimum wage. The only city in the entire analysis where a minimum-wage earner can afford a one-bedroom apartment while working a standard 40-hour week is Charlottetown, Prince Edward Island, which requires a rental wage of $15.63 against a minimum wage of $16.00.² This stands as a stark exception in a national sea of unaffordability.

1.3 Beyond Minimum Wage: The Plight of Common Low-Income Occupations

The affordability crisis extends well beyond those earning the legal wage floor. The 2019 CCPA report highlighted that Canada’s five most common occupations—including retail salespeople, administrative assistants, and food service workers—also earned average wages insufficient to afford modest rental housing.¹ This segment of the workforce, representing 1.8 million jobs or 12% of the total, forms the backbone of the service economy yet is systematically priced out of the communities they serve.

While wages for these occupations have seen increases since 2019, they have generally failed to keep pace with the concurrent surge in nominal rents. The OECD noted that nominal rent growth in Canada outpaced earnings growth in both 2023 (6.3% vs. 2.2%) and 2024 (7.9% vs. 4.6%).⁴² This differential ensures that even for workers earning several dollars above the minimum wage, the 30% affordability threshold remains out of reach in most urban markets. The struggle to afford rent is not a fringe issue affecting only the lowest-paid workers; it is a systemic challenge impacting a significant and essential portion of the Canadian labour force.

1.4 The Human Cost: Quantifying the Rent Burden on Canadian Households

The rental wage calculation illustrates the income required to achieve affordability. A complementary metric, the shelter-cost-to-income ratio (or rent burden), measures the actual portion of income households spend on housing. Data from the Canada Mortgage and Housing Corporation (CMHC) tracks this burden for the average household in major cities, showing a steady increase between March 2020 and March 2025.⁴³ In Toronto, the average rent burden rose from 15.1% to 16.4%, while in Vancouver it increased from 18.3% to 17.8% over the same period, after a dip during the pandemic.

These city-wide averages, however, mask a much more severe reality for those at the lower end of the income spectrum. The rental wage analysis provides the necessary context to understand this disparity. When the rental wage for a one-bedroom apartment in Toronto is calculated at $49.75 per hour and the minimum wage is $17.20, it is a mathematical certainty that a household earning at or near the minimum wage is not spending 16.4% of their income on rent, but rather a figure closer to 50% or 60%.

The two metrics thus tell a cohesive and troubling story. The unattainably high rental wage is the direct cause of the crushing rent burden experienced by low-income families. The former measures the price of entry into an affordable housing situation, while the latter measures the ongoing financial cost for those who cannot meet that price. The consistent rise in the average rent burden across Canada’s major cities since 2021 signals a system-wide erosion of affordability that disproportionately harms the most financially vulnerable households.⁴³

Section 2: A Market in Transition: Unpacking Canada’s 2025 Rental Landscape

While the affordability crisis for low-wage earners has deepened, the broader Canadian rental market has entered a distinct phase of transition in 2025. After several years of unprecedented rent growth and historically low vacancy rates, a confluence of supply increases, policy shifts, and economic headwinds is leading to a significant market rebalancing. This section analyzes these macro-level trends, explores the critical divergence between different rent metrics, and identifies the key drivers shaping the current landscape.

2.1 From Overheating to Rebalancing: Macro-Level Trends in Vacancy and Rent Growth

The defining characteristic of the 2025 rental market is a pronounced cooling trend. The extreme tightness that plagued renters post-pandemic has begun to ease as new supply finally starts to outpace demand in several key markets. Nationally, the purpose-built rental vacancy rate has risen to approximately 3.9% to 4.0%, its highest level in several years.⁴⁴ This is a significant shift from the historic low of 1.5% recorded in 2023.⁴²

This easing of vacancy has had a direct impact on pricing, particularly for units being advertised on the open market. After years of record increases, national asking rents have effectively stalled, with year-over-year growth turning slightly negative by mid-2025, in the range of -0.7% to -1.5%.⁵ This marks a dramatic reversal from the 8% to 12% annual increases seen in the preceding years.⁵

This national trend is reflected in many of the country’s largest and previously most overheated markets. In the first quarter of 2025, year-over-year asking rents for two-bedroom purpose-built rental apartments declined in Vancouver (-4.9%), Toronto (-3.7%), Calgary (-3.5%), and Halifax (-4.2%).⁴³ While some markets like Edmonton (+3.9%) and Montréal (+2.0%) still registered modest growth, the pace has slowed considerably.⁴³ This rebalancing provides the first signs of relief for prospective renters after a prolonged period of intense competition and escalating costs.

Table 2: Canadian Rental Market Key Indicators, 2023-2025

Indicator	2023	2024	Q1 2025	Trend & Outlook
National Vacancy Rate	1.5%	2.3%	~3.9%	Rising; market easing
YoY Change in Asking Rents (2-BR, Purpose-Built)
Vancouver	+4.5%	-4.9%	Cooling
Toronto	+3.8%	-3.7%	Cooling
Calgary	+17.0%	-3.5%	Cooling
Halifax	+8.7%	-4.2%	Cooling
Edmonton	+13.9%	+3.9%	Moderating Growth
Montréal	+8.4%	+2.0%	Moderating Growth
Ottawa	+3.9%	+2.1%	Moderating Growth
National Rental Apt. Starts	71,388	83,561	N/A	Record levels in 2024; expected to remain high in 2025 before potentially slowing

Sources: Vacancy Rates ⁴²; YoY Rent Changes ⁴³; Rental Starts.⁴³

2.2 The Two-Tier Market: Divergence in Asking Rents vs. Occupied Rents

One of the most crucial and nuanced dynamics of the 2025 market is the stark divergence between the cost of vacant units and the average cost across all occupied units. While the data clearly shows that asking rents for available apartments are falling in many cities, CMHC analysis reveals that the average rent paid by all tenants—including those in long-term tenancies—is still rising sharply.⁴³

This phenomenon, which can be termed the “Great Disconnect,” is starkly illustrated by Q1 2025 data. In Toronto, while asking rents for two-bedroom units fell by 3.7% year-over-year, rents for occupied units rose by 10.7%. The disparity was even more pronounced in Halifax, where a 4.2% drop in asking rents was accompanied by a 17.1% surge in occupied rents. Similar patterns were observed across all major markets, including Vancouver ( -4.9% asking vs. +7.1% occupied) and Ottawa (+2.1% asking vs. +8.8% occupied).⁴³

The mechanism driving this disconnect is rooted in low tenant turnover. In markets with rent control regulations or simply due to tenants’ fear of facing massive rent hikes if they move, people are staying in their current apartments for longer periods. The average rent for the entire pool of occupied units is therefore slow to react to current market conditions. It primarily increases when a unit does turn over, and the landlord adjusts the rent from its older, lower rate to a new rate that reflects the high market peak of 2023-2024. In Toronto, the gap between the rent for a vacant unit and an occupied one reached 44% in 2024, the highest among major cities.⁴³

This dynamic creates a form of “shadow inflation” within the rental market. The cooling of asking rents provides a potentially misleading picture of relief for the average renter. The financial pain of past rent hikes is still being absorbed into the system as units gradually turn over. This results in a deeply inequitable, two-tier market. Long-term tenants are shielded by their existing leases, creating “golden handcuffs” that discourage them from moving even if their housing needs change. Conversely, new households—such as immigrants, students, and young families—or any existing tenants forced to move due to life circumstances are confronted with the full, punishing cost of entry set during the market’s peak. This system actively hinders labour mobility and prevents households from optimizing their housing choices, creating a market that is simultaneously cooling for landlords with vacancies and heating up for tenants who have no choice but to move.

2.3 Shifting Headwinds: The Impact of Immigration Policy and Economic Uncertainty

The rebalancing of the rental market is not occurring in a vacuum; it is the direct result of significant shifts in both federal policy and the broader macroeconomic environment. The primary driver has been a policy-induced shock to the demand side of the rental equation.

After reaching a 66-year high of 3.2% in 2023, Canada’s population growth is slowing dramatically.⁴⁴ This is a direct consequence of the federal government’s decision to curb 2025 immigration targets and, crucially, to reduce the intake of non-permanent residents (NPRs) such as international students and temporary foreign workers.⁴⁴ This group has been a primary driver of rental demand, particularly in major urban centers. The impact of these policy changes is already being felt, with markets most exposed to NPRs—such as those in British Columbia, Ontario, and Nova Scotia—seeing the most significant softening in rental demand and advertised rents.⁴³

This policy-driven demand moderation is compounded by growing economic uncertainty. The Canadian economy is facing headwinds from potential U.S. trade tariffs, which are creating labour market weakness in trade-exposed industries and dampening consumer confidence.⁴⁹ A cooling economy and rising youth unemployment are further tempering household formation and reducing the capacity of prospective tenants to absorb high rental costs.⁴³ The combination of these factors has shifted the market’s fundamental dynamics, moving from a state of demand far outstripping supply to one where a wave of new supply is meeting a more cautious and constrained pool of renters.

Section 3: The Supply Conundrum: Challenges in Rental Housing Development

The supply side of Canada’s rental market is characterized by a historic construction boom that is now facing a period of heightened uncertainty. While the delivery of new units is providing some relief to renters, the sustainability of this supply growth is in question. This section examines the drivers of the recent construction wave, the emerging headwinds for developers, the debate over the type of housing being built, and the persistent structural barriers that impede the creation of a more diverse and affordable rental stock.

3.1 A Wave of New Supply: The Role of Government Incentives and Market Dynamics

In response to years of under building and a worsening affordability crisis, Canada is experiencing a surge in purpose-built rental construction, with nearly 100,000 units currently underway nationwide.⁴⁴ This wave of new supply, which reached a record of over 83,500 rental apartment starts in 2024, is a critical factor in the market’s recent rebalancing.⁴³

However, this construction boom is not solely a product of private market forces. It has been overwhelmingly enabled by federal government intervention. Analysis by the CMHC reveals that its financing programs, chiefly the Apartment Construction Loan Program (ACLP) and the multi-unit Mortgage Loan Insurance (MLI) products, have become indispensable to the development sector. The share of new rental apartment starts supported by these CMHC initiatives grew from a mere 5.4% in 2017 to a staggering 88.4% in 2024.⁴³ This data point is crucial: it demonstrates that without substantial public-sector financial backing and risk mitigation, the private market has been either unable or unwilling to finance the current level of rental construction. This heavy reliance on government support underscores the challenging economics of building rental housing in Canada’s high-cost environment.

3.2 Developer Headwinds: Rising Vacancies, Costs, and the Specter of a Slowdown

Despite the high volume of projects being completed, the ground is shifting for rental developers. A growing sense of caution is pervading the industry, fueled by a combination of market-based and financial pressures that threaten the viability of future projects.

The primary challenge is the collision of new supply with softening demand. In previously ultra-tight markets like Toronto and Vancouver, newly constructed, higher-end rental buildings are underperforming, with vacancy rates approaching 10%.⁴⁴ Landlords and property managers are increasingly resorting to incentives such as one month of free rent, moving allowances, and signing bonuses to attract tenants and fill these new units, a clear sign of a softening market.⁴³ This dynamic is particularly acute in Calgary, where a record influx of new rentals met a moderating flow of interprovincial migrants, causing the city’s vacancy rate to spike from 1.4% in 2023 to roughly 7.4% by 2025.⁴⁴

Compounding the issue of rising vacancy are persistently high construction and financing costs, which continue to squeeze developer profit margins. The combination of these headwinds—slowing demand, rising vacancy in new builds, and high costs—is leading developers to delay or cancel planned projects.⁵⁰ This growing caution is expected to translate into a material slowdown in new rental project starts by 2026 and 2027.⁴⁴ This creates a significant long-term risk: if the current construction boom is followed by a period of underbuilding, Canada could find itself facing another severe supply crunch later in the decade, particularly if population growth rebounds.

3.3 The Luxury Paradox: Does Building High-End Units Help or Hinder Affordability?

A central debate surrounding the current construction boom is the nature of the supply being delivered. The market is producing a record number of units, but they are predominantly high-end apartments and condominiums that are not directly affordable to the low- and middle-income households facing the most acute housing pressures.⁴⁴ This has led to criticism that the new supply is failing to address the core of the affordability crisis.

However, the economic impact of new housing supply is more complex than it appears. The construction of new market-rate, and even luxury, housing can indirectly improve affordability for lower-income groups through a process known as “filtering” or the “housing chain reaction”.⁵² This process works as follows: when a new, high-end building is completed, it attracts higher-income households who move out of slightly older, less expensive housing. This move creates a vacancy in a desirable, second-tier building. That vacancy is then filled by a household from the next income level down, which in turn frees up their previous, more modest home. This cascade of moves continues down the housing ladder, eventually increasing the availability of and reducing competition for units in the most affordable segments of the market.

Recent research provides evidence for this effect. One study estimates that for every 100 new market-rate units built in a city, approximately 70 vacancies are created in less expensive neighbourhoods, with 39 of those vacancies appearing in the lowest-income areas.⁵² This suggests that all new supply, regardless of its initial price point, helps to ease pressure across the entire housing system.

Nevertheless, it is critical to recognize the limitations of this mechanism. Filtering is a slow and indirect process that can take several years to fully manifest.⁵² More importantly, it is highly unlikely to ever produce housing that is truly affordable for the lowest-income households, who will almost always require some form of direct public assistance or non-market housing to secure adequate shelter.⁵² The conclusion is therefore a nuanced one: while the construction of high-end rentals does contribute positively to overall market health and affordability, relying solely on this strategy is insufficient. A comprehensive approach must also include policies that directly support the creation and preservation of deeply affordable housing.

3.4 Structural Barriers: The Enduring Impact of Zoning, Approvals, and NIMBYism

Beyond immediate market dynamics, the ability to build a sufficient and diverse supply of rental housing is fundamentally constrained by a deeply entrenched set of regulatory and political barriers. These structural impediments artificially limit supply, drive up costs, and prevent the development of more affordable housing forms.

The most significant barrier is restrictive and exclusionary zoning. Across Canada, vast swaths of residential land in urban areas are zoned exclusively for single-detached homes. Toronto’s “Yellow Belt,” which comprises roughly one-third of the city’s land area, is a prime example of this policy, which effectively outlaws the construction of gentle density options like duplexes, triplexes, or small apartment buildings.⁵³ Such zoning not only limits the total number of homes that can be built but also perpetuates economic segregation by ensuring that many neighbourhoods remain accessible only to the wealthiest households.⁵⁴

Compounding the issue of restrictive zoning are lengthy, complex, and unpredictable municipal approval processes. These bureaucratic hurdles create significant delays and add substantial costs for developers, which are ultimately passed on to renters. The variation in efficiency is stark: average approval times for housing projects range from a reasonable five months in Charlottetown to a debilitating 32 months in Toronto.⁵⁵

Finally, the development of denser and more affordable housing is often stymied by community opposition, a phenomenon commonly known as NIMBYism (“Not In My Backyard”). Local resistance, frequently framed in terms of preserving “neighbourhood character” or concerns over traffic and property values, can exert powerful political pressure on municipal councils to reject or scale down much-needed housing projects.⁵¹ Together, these structural barriers create a formidable obstacle to increasing rental supply and represent a key area for policy reform.

Section 4: Pathways to Affordability: An Evaluation of Policy and Innovation

Addressing Canada’s multifaceted rental crisis requires moving beyond a diagnosis of the problems to an evaluation of tangible, forward-looking solutions. A sustainable path to affordability will necessitate a paradigm shift in how Canadian cities plan for and regulate housing. This section explores the most promising innovations and policy levers, focusing on the critical role of “Missing Middle” housing, a framework for enabling its development, and the need for a balanced strategy that integrates supply-side reforms with essential protections for tenants.

4.1 Bridging the Gap: The Case for “Missing Middle” Housing

For the past half-century, new housing development in North America has been dominated by a duopoly of sprawling, low-density single-family homes and concentrated, high-density apartment towers.⁵⁵ The wide range of housing types that fall between these two extremes—such as duplexes, triplexes, fourplexes, townhouses, and low-rise courtyard apartments—has largely gone “missing” from the development landscape. This is the “Missing Middle.”

This form of gentle, medium-density housing is critical for achieving a more affordable and equitable housing system for several reasons. First, by allowing for more units on a given parcel of land than a single-family home, Missing Middle housing inherently increases supply and introduces more housing options into established neighbourhoods, often those with good access to transit, schools, and jobs.⁵³ Second, these housing types can often be built at a lower cost per unit than high-rise buildings and can be undertaken by small and medium-sized enterprises (SMEs), fostering innovation and competition in the development industry.⁵⁵ Finally, Missing Middle housing can provide a wider range of home sizes and price points, catering to diverse household needs, from young professionals and small families to downsizing seniors.⁵⁵ By filling the gap between single-family homes and large apartment buildings, the Missing Middle represents a powerful tool for creating more vibrant, walkable, and affordable communities.

4.2 A Framework for Action: Enabling Gentle Density and Diverse Housing Options

Translating the concept of the Missing Middle from an architectural idea into a widespread reality requires a deliberate and comprehensive policy agenda at the municipal and provincial levels. It is not enough to simply wish for more diverse housing; governments must actively dismantle the barriers that prevent it and implement policies that enable its construction. Research from institutions like the University of Toronto’s School of Cities has identified a clear set of “enablers” that can unlock the potential of gentle density.⁵⁵

These enablers provide a practical roadmap for policymakers seeking to reform their local housing systems. Rather than a single silver-bullet solution, they represent a suite of interconnected reforms that, when implemented together, can create a regulatory environment where Missing Middle housing is not just possible, but actively encouraged. Table 3 outlines these key policy levers and provides real-world examples of their successful implementation in Canadian municipalities, demonstrating that these are not theoretical ideals but achievable and effective reforms.

Table 3: A Comparative Framework of “Missing Middle” Enablers

Enabler	Policy Action	Best-Practice Example
1. Ending Exclusionary Zoning	Eliminate zoning that exclusively permits single-family homes. Legalize duplexes, triplexes, and other multiplexes “as-of-right” in all residential areas.	The City of Victoria, BC, has implemented new regulations allowing for the construction of up to six homes (e.g., houseplexes, corner townhouses) on an average residential lot, adding diverse housing options to traditional neighbourhoods.56
2. Rapid Approvals	Create streamlined, predictable, and fast approval pathways for Missing Middle projects, especially those using pre-approved designs.	The City of Kelowna, BC, has developed a system of pre-approved, replicable designs for Missing Middle housing that can receive a development permit in as little as ten days, dramatically reducing timelines and uncertainty for small developers.55
3. Modernizing Building Codes	Update provincial building codes to align with international best practices that lower construction costs for medium-density buildings.	The province of British Columbia now permits single-egress staircases for small apartment buildings up to six storeys. This allows for more efficient floor plans, larger family-sized units, and reduces overall construction costs.55
4. Eliminating Development Taxes	Reduce or eliminate municipal development charges and other fees for purpose-built rentals and smaller-scale Missing Middle projects to improve financial viability.	The Federal Government removed the Goods and Services Tax (GST) on the construction of new purpose-built rental housing in 2023, a significant step in reducing the tax burden on projects that increase rental supply.44
5. Eliminating Site Design Barriers	Move away from rigid and arbitrary rules like minimum setbacks and floor-area ratios towards more flexible, performance-based standards (e.g., minimum permeable surface).	This approach, advocated by housing researchers, allows for more innovative and site-appropriate designs that can better accommodate gentle density while achieving environmental goals like tree retention and stormwater management.55
6. Financial Enablers	Provide accessible financing and grants for small-scale developers, non-profits, and homeowners looking to build Missing Middle housing, such as accessory dwelling units (ADUs).	The Canada Mortgage and Housing Corporation (CMHC), through its Housing Supply Challenge, is actively funding innovators who are developing new financing models and construction techniques for small-scale and Missing Middle housing.55
7. Setting Clear Targets	Establish ambitious but clear municipal targets for new housing starts, including specific targets for Missing Middle and non-market housing, to drive action and accountability.	The provincial government of British Columbia has taken the step of setting housing targets for municipalities and has reserved the right to override local zoning to ensure those targets are met, a strong measure to combat inaction.
8. Fostering Real Local Democracy	Reform public hearing processes to give greater weight to the housing needs of the entire community, including future residents, rather than allowing them to be dominated by the opposition of a few immediate neighbours.	Cities like Edmonton, AB, have successfully reformed their zoning bylaws to pre-approve a wider range of housing types, reducing the number of project-by-project public hearings where NIMBY opposition can cause delays or cancellations.

Sources:.⁴⁴

4.3 A Multi-Pronged Strategy: Integrating Supply-Side Incentives with Tenant Protections

While reforming regulations to enable more supply is the cornerstone of a long-term affordability strategy, it is not sufficient on its own. A successful and equitable housing policy must be a balanced, multi-pronged approach that pairs supply-side action with robust protections for existing tenants. An “either/or” debate between building more homes and protecting renters is a false dichotomy; both are essential components of a healthy housing system.

Continued federal and provincial support for rental construction, through programs like the ACLP and the provision of low-cost financing, remains critical, particularly given the challenging economics for developers.⁴³ This must be complemented by the aggressive removal of the regulatory barriers detailed in Section 3.4 to unleash the potential of the private and non-profit sectors to build more housing.

Simultaneously, governments must strengthen measures that protect tenants and preserve the existing stock of affordable housing. This includes implementing and enforcing effective rent regulation that prevents exorbitant price gouging while still allowing for investment in building maintenance. It also requires strong rules to prevent “renovictions,” where landlords evict tenants under the guise of renovations only to re-rent the unit at a much higher price.⁵⁷ The federal government’s proposed Blueprint for a Renters’ Bill of Rights is a step in this direction, but it must be backed by enforceable national standards to be effective.⁵⁹ By pursuing both supply growth and tenant protection in tandem, policymakers can work towards a market that is both dynamic and stable, offering more options for prospective renters while providing security for those already in their homes.

Section 5: Concluding Analysis and Strategic Recommendations

The Canadian rental market stands at a critical juncture. The analysis presented in this report reveals a complex system characterized by a severe and persistent affordability crisis for low-wage earners, a fragile and misaligned supply response, and a set of deep-seated structural barriers that impede progress. While recent market cooling offers a brief respite from years of relentless price escalation, it does not solve the underlying problems. Moving forward requires a clear-eyed understanding of the interplay between affordability and supply, and a commitment to bold, strategic action from all levels of government and all sectors of the housing industry.

5.1 Synthesis of Findings: The Interplay of Affordability and Supply

The core narrative of the Canadian rental market in 2025 is one of contradiction and challenge. The key findings of this report can be synthesized as follows:

• The Affordability Crisis is Structural and Severe: The gap between minimum wages and the “rental wage” required to afford a modest apartment is untenable in nearly every major Canadian city. This is not a cyclical issue but a structural deficit that has persisted for years, placing an unsustainable burden on a significant portion of the workforce.
• Market Rebalancing Offers Incomplete Relief: A policy-driven moderation in demand and a surge in new completions have cooled asking rents and raised vacancy rates. However, this has not translated into broad affordability gains. A “Great Disconnect” between falling asking rents and rising occupied rents means that the financial pain of past price hikes is still being absorbed into the system, disproportionately affecting those who must move.
• The Current Supply Boom is Fragile and Mismatched: The recent record-breaking pace of rental construction is heavily dependent on government financing and is now facing significant headwinds from rising vacancies and high costs, threatening a future slowdown. Furthermore, this supply is overwhelmingly concentrated at the high end of the market, addressing affordability needs only indirectly and inefficiently through the slow process of filtering.
• The Most Promising Path Forward is Systemic Reform: The most significant obstacles to a balanced and affordable rental market are not market-based but regulatory. Exclusionary zoning, cumbersome approval processes, and outdated building codes artificially constrain the supply of diverse and affordable housing types. The most impactful and sustainable solution is a comprehensive policy agenda focused on enabling “Missing Middle” housing across all residential neighbourhoods.

5.2 Forward-Looking Recommendations for Policymakers, Developers, and Investors

Based on this analysis, a coordinated and strategic response is required. The following recommendations are offered to key stakeholders to address the interconnected challenges of rental affordability and supply.

For the Federal Government:

1. Leverage Funding to Drive Municipal Reform: Continue and expand low-cost financing for rental construction, such as the Apartment Construction Loan Program (ACLP) and MLI Select. Critically, eligibility for these programs, along with other federal transfers like the Housing Accelerator Fund and infrastructure funding, should be more explicitly tied to municipal progress on ambitious, measurable targets for zoning reform, density, and approval timelines.
2. Strengthen the National Framework for Tenant Rights: Move forward with the proposed Renters’ Bill of Rights, but ensure it is more than a blueprint. Work with provinces to establish a set of clear, enforceable national minimum standards for tenant protections, including regulations on rent increases for existing tenancies and stronger prohibitions against bad-faith evictions.⁵⁸

For Provincial Governments:

1. Mandate an End to Exclusionary Zoning: Utilize paramount legislative authority to override restrictive municipal zoning bylaws. Provinces should mandate as-of-right approval for a range of Missing Middle housing types (e.g., up to four units on any residential lot) across all urban municipalities, removing the project-by-project political battles that stifle supply.
2. Modernize Provincial Building Codes: Proactively update provincial building codes to align with international best practices that can lower the cost of construction for medium-density buildings. Adopting measures like allowing single-egress staircases for buildings up to six storeys, as British Columbia has done, can significantly improve the financial viability of more diverse and family-friendly rental projects.⁵⁵

For Municipal Governments:

1. Create a “Permit-Ready” Environment for Gentle Density: Aggressively streamline and simplify approval processes for Missing Middle housing. This should include eliminating parking minimums near transit, reducing or waiving development charges for purpose-built rentals, and, most importantly, developing catalogues of pre-approved designs. The goal should be to create a “10-day approval” pathway for compliant projects, following the successful model pioneered by Kelowna, BC.⁵⁵
2. Proactively Plan for Growth: Shift from a reactive, project-by-project assessment of development applications to a proactive, city-wide planning approach that pre-zones for growth and density, particularly along transit corridors. This provides certainty for developers and depoliticizes the creation of much-needed housing.

For Developers and Investors:

1. Diversify Development Portfolios: While high-rise development will remain a key part of the urban landscape, developers and investors should strategically diversify into Missing Middle and mixed-use projects. These developments can be less capital-intensive, have shorter construction timelines, and cater to a broader and more resilient market segment than luxury high-rises, offering a compelling long-term value proposition.⁶⁰
2. Focus on the Long-Term Fundamentals: Despite the short-term market cooling, Canada’s long-term fundamentals—including a structural housing deficit and a continued reliance on population growth—point to sustained demand for rental housing. Investors should recognize the long-term stability and value of well-managed, purpose-built rental assets and partner with governments to overcome the barriers to their construction.