Millennials will increase rent prices in the suburbs, and four other take-aways from new rent report

Rents are rising amid high demand, interest rates and inflation, and will continue to get worse over the next decade unless governments work together.

That’s according to the fourth annual report from Rentals.ca Network — a group of internet listing services including Rentals.ca and TorontoRentals.com, among others — which paints a sobering picture of the uphill battles ahead in creating affordable rentals.

The market predictions from experts across Canada take into account the impacts of the pandemic on housing as well as further interest rate hikes expected in the coming months.

Here are five key projections from the report:

Rents will continue to rise

Though the pandemic started with high rents, there was a dip mid-2021 as COVID-19 worsened and people worked and studied from home, creating less demand for available units. But rents rose again later that year, and they haven’t stopped, the report says.

The increase is driven mostly by low supply and high demand in Canadian urban centres. The exception is the Prairies, where market pressures are expected due to factors such as growing housing inventory and slowed migration in Winnipeg; and a higher employment rate and more available rental units in Saskatoon.

But for most Canadian cities, rent isn’t expected to lower this year, the report predicts, though Toronto, Mississauga, Montreal and Calgary are expected to end the year below their peak levels from the end of 2019 and early 2020, says one expert . But that may change depending on government regulations, immigration and COVID-19.

“Tacked on to the typical renting problems we now have inflation, interest rates are going up, the housing market has gone through the roof,” said Paul Danison, content director for Rentals.ca, who helped author the report.

“With the new interest rates and the cost of housing, that puts more pressure on the rental market because a lot of people who could or would buy now are continuing to rent.”

Millennials will increase rents in the suburbs

With flexible work options, millennials will keep moving out of major markets into places where they can afford more space, experts predict.

“The work-from-home phenomenon is here to stay, even if partially,” said Danison.

Migration out of the city is in turn projected to drive up rents even more in the secondary markets because of lower supply.

Fewer rentals with a side of free Wi-Fi (or helicopter rides)

When the pandemic hit and employers encouraged work from home, some landlords started to get creative to encourage people to rent their homes.

“Incentives were really big during the pandemic when people weren’t moving very much and there were more vacant units,” said Danison.

That could include a month or two of free rent, or free Wi-Fi, streaming services, parking, gym memberships or digital subscriptions.

“We found some wild ones,” Danison added. One property manager in Toronto offered a fully stocked wine fridge, he said, and another in Montreal offered either skydiving or a free helicopter ride.

But the perks aren’t as common or ambitious now.

“The vacancies are lower and the landlords and property managers are not competing now so much for trying to get their units filled,” he said.

Work-from-home could turn into live-at-work

To help meet rental demand while addressing an oversupply of office space since COVID-19, more office-to-residence conversions are expected, the report notes.

But experts say municipalities should streamline the process for these conversions to help increase traffic to downtown cores.

“Typically, you can take cars off the street because you try to do this around transit places,” Danison said. “It’s a place where you can work, you live there, there’s restaurants, there’s grocery stores, entertainment venues.”

Government co-operation key to addressing housing crisis

Affordability is expected to get worse and become the top issue in Toronto’s housing and rental markets in the future, the report notes.

Municipalities are currently acting in a vacuum when enforcing zoning regulations, which the report says leads to uncertainty, with complex approval processes affected by political interference. That’s why experts are calling for zoning and land use decisions to be handled regionally or provincially.

“You can’t have provinces coming up with a set of rules and then get down to the municipal level and the municipal government just says ‘No, we’re not going to do that,’” Danison said. “They have to come together and come up with some kind of solutions.”

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