Montreal's vacancy rate is going up, but so is rent

Renters outnumbering home owners Yardi Matrix’s Doug Ressler speaks about the rise in renters across demographics as the housing market changes.

The vacancy rate in Montreal is going up for the first time since the pandemic started — but so are rents, according to new data from the Canada Mortgage and Housing Corporation (CMHC).

The vacancy rate in the city is now at 2.1 per cent, up from 1.5 per cent in January. A healthy vacancy rate is typically around 3 per cent.

The CMHC’s Fall 2024 Rental Market Report published Tuesday showed that vacancies are higher in newer buildings, where rents rose significantly, and "as a result, the rental market remained tight, especially for low-income renters" this year. Rental unit completions were among the highest on record.

Housing advocates have said for years that simply building more, expensive units would not ease the housing crisis and point to the report as proof.

Catherine Lussier, a spokesperson for housing advocacy group FRAPRU, said the idea that people with means will move into pricier units and leave their affordable ones behind is false. She pointed out that even when people do leave their affordable unit, landlords often hike the rent before the next tenant moves in.

The report notes that "the average rent increase was much higher for apartments that turned over to new tenants (18.7 per cent) than for those where a lease was renewed (4.7 per cent)."

"This is keeping [low-income] tenants in precarious situations, more than it is offering a solution for them for the long-term," Lussier said.

The CMHC’s report acknowledges that "such newer units were out of reach for many tenants” but “they will help meet increased housing demand in the area over the longer term."

The challenge, the report said, is providing a variety of units suitable for different budgets in the short-term, "especially for low-income households at a time when the cost of new units rose sharply."

Rent almost doubled in six years

According to CMHC data, the average rent in the Montreal area went up by 48.4 per cent since the Coalition Avenir Québec government came into power. The average rent for a two-bedroom purpose-built rental unit is now $1,176 and the average rent for a two-bedroom condo is $1,724. In 2018, the average monthly rent for a two-bedroom apartment in Montréal was $809.

Downtown Montreal has the most vacancies in the city, but rent prices in the area are among the most expensive, which limits demand. The high rent for new buildings is in part due to higher construction costs, according to the report, but those units are being rented out more slowly, which explains the increase in vacancy rates.

Less than 1 per cent of homes under $1,150 per month are available in the entire Montreal area, and they account for about 60 per cent of its rental stock.

The rest of the province is feeling the squeeze — the vacancy rate is still under 1 per cent in Trois-Rivières, Quebec City, Saint-Georges, Montmagny, Rivière-du-Loup, Sainte-Marie, Gaspé, Farnham and Alma.

"It's very clear that if we continue to let things go the way they're going, they're not going to resolve themselves," said Jayne Malenfant, a McGill University professor in education who has done research on the housing crisis.

"Without some kind of intervention or action in more targeted ways by all levels of government, this isn't something that's going to get better."

In 2019, the federal government asserted that housing is a right, but Malenfant said there’s a lack of political will to enact real right to housing regulations like deeply affordable housing, social housing, homelessness prevention programs, rent caps and rent registries.

They said that viewing housing as an investment is incompatible with the right to housing.

Though the provincial government put a moratorium on certain evictions — which will be lifted once the vacancy rate hits 3 per cent — and Montreal has acquired hundreds of units to keep them off the speculative market, many believe it’s not enough.

"There's often a disconnect between the policies and the kinds of measures that are being enacted," said Malenfant.

"They're not addressing the root cause and what people on the ground are advocating for, community groups, tenants rights groups, people experiencing housing precarity and homelessness have been calling for."

The province is still playing catch-up and is moving too slowly, Malenfant added.

The Société d'habitation du Québec (SHQ) said it is concerned about the situation, especially for low-income households looking for affordable housing.

It said it is working to increase the supply of social and affordable housing throughout Quebec both through agreements with the federal government and through initiatives with public and private partners.

Between 2023 and 2028, more than 24,000 social and affordable housing units will have been delivered across Quebec, it added, without making a difference between the two.

Fewer homeowners in the city

The CMHC said rent growth is higher than the average wage growth, eroding affordability. On top of recent reports showing increases in food bank uses, Malenfant said there’s an affordability crisis.

"People are having to decide, literally, whether they're going to pay their rent or pay for food, because they can't do both," said Malenfant.

"Wages not keeping up are preventing people from home ownership and keeping them in the rental market."

Another report by real estate marketplace Point2Homes corroborates this. It shows that renters living alone have outnumbered homeowners for the first time in Quebec, and that’s especially true in Montreal: almost 75 per cent of one-person households rent.

Like the CMHC, Point2Homes said the data reflects the impact of rising home prices and evolving lifestyles.