A perfect storm of Edmonton stats, trends and situations continues to cause an Edmonton rentals crunch. It also gives Edmonton a dubious distinction of being #1 in Canada!
According to reliable sources like CMHC, Rentals.ca, developers and others, Edmonton’s rental crunch is consistent with the national situation, but worse. Although most of Canada is dealing with the lowest rental vacancy rates since the 1980s, Edmonton’s rental situation, compounded by sharp rent increases, is subtle but surprising.
While Edmonton remains one of the most affordable for rental costs among Canadian cities, it also claims the rank of having the lowest vacancy rate and the highest rent increase spike in the country.
Yes! Worse than Calgary, Vancouver or Toronto!
Recent stats show that Edmonton rent increases surpassed Calgary with a jump of 17.1 per cent compared to last year. It spiked the average Edmonton rent up to $1,479. Specifics show the average rent for an Edmonton, one-bedroom is $1,330, and the average rent for an Edmonton two-bedroom is $1,637.
The rate hikes are just of Edmonton’s double whammy because Edmonton vacancy rates are also at a worrisome, all-time low. A recent report from CMHC tracks that in 2023, Edmonton’s vacancy rate fell to 2.4 per cent, down from 4.3 per cent in 2022.
Of course, the analysis and fine details get complex and complicated, but most experts agree that much of the blame for Edmonton’s rental crunch is due to Edmonton’s population growth from migration and immigration. Edmonton demand heavily outpaces rental supply and there are other factors like uncertainty about the economy, high interest rates and cautious developers who are reluctant about the business timing of purpose-built rental projects.
CMHC’s most recent Housing Market Outlook (HMO) underscored what Canadians have been experiencing for the past several years. There simply is not enough affordable housing in most areas of the country, particularly in Edmonton. The HMO also forecasts that Canada’s rental market – and the Edmonton rental crunch – may continue well into 2025 and 2026.
“Purpose-built rental starts, fueled by unprecedented demand and government support, hit record levels in 2023, sustaining overall housing starts in Canada near historically high levels,” explains Bob Dugan, CMHC’s chief economist. “However, unfavorable financing conditions are expected to make it more difficult for home builders to start new rental projects in 2024. We anticipate that by 2025 or early 2026, lower interest rates, continued government support and policies encouraging greater density in urban centers should make more projects viable.”
He notes that lower interest rates will also benefit homebuyers, as real income and confidence levels improve. Consequently, more homes are expected to be built in 2025-2026 and adds that, despite an increase in rental housing coming onto the market last year, supply is not forecast to keep up with demand, resulting in higher rents and lower vacancy rates throughout at least 2024.
CMHC’s Housing Market Outlook also emphasizes population growth as a key factor putting pressure on rental markets. Then stats and trends are unanimous. Edmonton’s population boom is a direct result of immigration and, particularly, significant interprovincial migration.
Recent stats show that, in 2023, Alberta’s population grew by 184,400 (more than four per cent), much of which came from international immigration with the Philippines, India and Nigeria ranking as the top three countries of origin. The lifting of travel restrictions due to COVID-19 has meant more immigrants and non-permanent residents arriving in Canada and an increasing share arriving in Alberta. Also, the federal government has been continually boosting its immigration targets.
Undisputedly, interprovincial migration is a key driver of Alberta’s (and particularly Edmonton’s) population growth. Newcomers, primarily from B.C. and Ontario, accounted for a net gain of 56,245 people, the highest annual net increase for any province or territory since data tracking began in the early 1970s.
While population growth is a dynamic positive for Edmonton’s growth and development, the actual numbers show that not only does the growing population increase demand, it spikes the cost of Edmonton rentals.
For Ash Mahmoud, president of Cairo Development and specialist in multi-family development, it is a positive and despite the momentary speedbumps, it is a long-term good for Edmonton’s future.
“Edmonton’s natural resources, oil and gas jobs and other factors have created a great buffer of stability for at least the last two years, especially after COVID. It has encouraged a huge inter-provincial immigration for the jobs, for affordability and the lifestyle, which is good. But it is also driving up demand for Edmonton rentals and the region simply doesn’t have enough.
“Even international immigration has diverted its natural settlement from Toronto’s GTA and Vancouver and shifted it to Alberta. After all, Edmonton has such a growing economy, it offers more job opportunities per capita than any other city and that continues to attract many people to move to Edmonton, not only from other provinces but from other Alberta cities.”
Adebola Omosola is a CMHC economist specializing in housing economics. She notes that, “Canada is facing the lowest national rental vacancy rate in 40 years. It gets complicated, of course, but supply has not been able to keep up with demand.”
She echoes the stats that key causes are sudden and high population growth and the affordability of homes. It is why rental prices have surged, especially in Edmonton.
“The growing population drives the demand for rentals. Rental vacancy rates follow and will probably continue to be tight for the rest of the year, or longer,” she adds.
“It will take time for new rental housing to come on to the market. Interest rates will likely start declining in the second half of 2024, which means home ownership will start bouncing back, gradually creating rental vacancies.”
When it comes to Edmonton’s purpose-built and multi-family housing, Mahmoud is confident the momentum is about to kick in.
“It will take a huge supply of rental apartments year over year for the next five years to keep the economy in a positive direction, create jobs and stabilize Edmonton’s cost of living increase; but it will happen!” he says with positivity. “It will increase the resources of construction teams and reduce interest rates, so more developers are encouraged to build more rental units.”
