Montreal rental vacancy rate could hit 4.8 per cent by 2028 as supply grows

The vacancy rate in Montreal is expected to rise as slower population growth and increased rental supply ease demand. An apartment to rent in Montreal. (CTV News)

Slower population growth and an increase in housing supply in Montreal could drive up the vacancy rate to 4.8 per cent by 2028, according to new data from the Canada Mortgage and Housing Corporation.

The rate currently sits at 3.1 per cent, the theoretical equilibrium threshold.

Francis Cortellino, an economist for the national housing agency, explained that the Greater Montreal area is expected to have zero population growth over the next two years because of a significant reduction in international immigration, which will slow rental demand.

That, coupled with almost 30,000 rental units currently under construction and slated to come into the market over the next two years, could give some renters more power in the newly built segment, leading to slower rent growth.

“You’re going to have a lot of incentives being offered to try to attract tenants. So you’re not going to have to pay one, two or three months of rent,” Cortellino said in an interview.

“Hopefully, if income growth is higher than rent growth, affordability will stop worsening and eventually may become a bit better in the next few years.”

However, affordability will likely remain an issue, especially for lower-income renters, because of substantial rent increases and low vacancy rates over the last few years.

Cortellino added that a balanced vacancy rate does not translate into the market suddenly becoming affordable.

“We still see vacancy being quite low in the lowest range, let’s say below $800 per month,” he said.

“However, what we saw last year is that the vacancy rate increased a little bit. So last year the vacancy rate for the lowest rent was maybe 1.5 per cent. It’s still quite low, but the year before that it was close to zero per cent.”

To really help ease the ongoing housing crisis, more affordable housing has to be built, according to the economist.

“You need to also diversify the number of units coming to the market. We all know that there are some people with low incomes who aren’t able to buy or rent those expensive units that are being built. But if you can have units that are more affordable for them, and also units for people who can afford those expensive units, if you bring more supply for different kinds of households, that’s going to help everyone at the end of the day,” Cortellino said.