(Visual: Animated introduction featuring various shapes of houses and doors, as well as a search bar where the term "Canada's housing market" is typed in.)

0:00:01

NARRATOR: You're listening to "In-House," Canada's housing podcast, where we share the latest on Canada's housing market.

(On-screen text: In-House, Canada's Housing Podcast)

(Visual: Animated transition to a shot of host Joelle Hamilton speaking to the camera and sitting at a table on which microphones, water glasses and laptop computers have been placed. Guests Kevin Hughes and Tania Bourassa-Ochoa are sitting on the left and right sides of the table, respectively.)

0:00:17

JOELLE: Hi, everyone. I'm your host, Joelle Hamilton, and joining me in the studio today are Tania Bourassa-Ochoa and Kevin Hughes, two of CHMC's Deputy Chief Economists. Welcome back to the studio.

TANIA and KEVIN: Thank you.

(Visual: While Joelle is making introductions, the camera cuts to single-person shots of guests Kevin and Tania, before cutting back to the three-person shot.)

0:00:29

JOELLE: And together, we're going to explore the Fall 2024 Rental Market Report. And, correct me if I'm wrong, I think we've been releasing this report since 2001. And that means that we've been assessing the rental market for a few decades or a couple decades, now.

(On-screen text: Joelle Hamilton, Communications & Marketing — CMHC)

(Visual: The camera remains on the three-person shot of all participants, before cutting to a single-person shot of Joelle while she is speaking.)

0:00:45

JOELLE: And in recent years, we've seen that a number of factors are converging, and they're creating an environment or a rental market environment where demand is very strong. And that supply is growing, but still not enough to meet that growing demand.

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0:01:07

JOELLE: And in 2023, our national vacancy rate was 1.5% and there was an 8% year-over-year rent increase, and that was seen across Canada. So, today, we're going to see what's changed since that last report.

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0:01:22

JOELLE: So, I read in the Fall Report that the national vacancy rate increased to 2.2% in this last year, which is up from that 1.5% that I had just mentioned, and rent growth also slowed slightly. But why are renters still having a hard time affording their place to live?

(Visual: The camera cuts to a single-person shot of host Joelle.)

0:01:43

KEVIN: Right. So, I think you gave a good assessment of the general picture. I mean, these… Usually, these changes, it's rare that they are very large in scale. So, they're incremental changes. There has been easing.

(On-screen text: Kevin Hughes, Deputy Chief Economist — CMHC)

(Visual: The camera cuts to a single-person shot of guest Kevin Hughes.)

0:01:56

KEVIN: But to your question, I think that the… The main factors that we saw driving this story in the last years are still present, right now. So, you know, we have a chronic, an acute and a chronic lack of supply which is driving up rents, especially turnover rents. I know that you've looked at that in particular, Tania.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:02:17

KEVIN: So, you have that. You have the economics of it, as well. So, new households, do people leave their families to form new households or not, you know? The tightness of the rental market makes it difficult to find a place. So, really, the supply story continues to dominate a lot.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:02:37

KEVIN: And of course, for people who may be ready to buy a home, that purchase is still beyond the possibilities of many people. So, they are still in the rental market. And then, we have very strong demographics that are explaining this, as well.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:02:52

JOELLE: So, I know that demand is still strong in the rental market, but I did read in the report that we've seen kind of the highest supply growth in the last three decades, which I thought was significant. Can you tell us what's driving that trend?

(Visual: The camera cuts to the three-person shot of all participants.)

0:03:11

TANIA: Sure. So, you're right. There's been, in fact, record growth in terms of new completions for purpose-built rentals. There's a lot of factors that explain why we're seeing those numbers, which is actually a 30-year historical average.

(On-screen text: Tania Bourassa-Ochoa, Deputy Chief Economist — CMHC)

(Visual: The camera cuts to a single-person shot of guest Tania Bourassa-Ochoa.)

0:03:29

TANIA: So, on one hand, you have public sector support programs at all levels of government. You have new policies that have been implemented to help build more housing. You know, it is to say that that could be different, when you're looking at different provinces or different municipalities, but in the end, we do have more programs and support to see more building.

(Visual: The camera remains on the single-person shot of guest Tania.)

0:03:56

TANIA: So, we did see some cities lead the way, in terms of these new completions. So, Montréal, first in line: over 14,000 units completed in the purpose-built segment. So, it is a little bit lower than what we saw last year, but it's still very high.

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0:04:18

TANIA: We also have Calgary that recorded, I think, 7,000 new units completed in the purpose-built segment. And you also have Ottawa, Edmonton, that have also seen increases in terms of the new supply that is added to the market.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:04:38

KEVIN: You could also point to the inflationary period that we've just gone through. So, that, I think, has definitely slowed down the pace, normally, of rental construction or apartment construction. So, normally, you know, these things advance at a certain pace, but we have heard and observed difficulties for builders to adjust, and that has postponed things. So, normally, we would've seen these things happen last year and we didn't. And now, we're seeing maybe more of a convergence of that supply.

(Visual: The camera cuts to the single-person shot of guest Kevin.)

0:05:13

JOELLE: So, we did see regional variations in rent growth. So, across the country, things are different in our major cities. What is driving these trends?

(Visual: The camera cuts to a single-person shot of host Joelle, before cutting back to the three-person shot of all participants while she is speaking.)

0:05:24

KEVIN: For us economists, we're always looking at supply and demand factors and how these things work together to amount to price and price growth. So, when you mention the regions and markets, housing is very much a regional phenomenon. We talked about Canadian averages, but you really have to look at the city basin to see what's happening there.

(Visual: The camera cuts to the single-person shot of guest Kevin.)

0:05:45

KEVIN: So, if you look at Calgary, for example, you have a strong economy. You have a stock that tends to be higher-priced, as well. So, that has driven things up more. In Toronto, well, there's been easing, right now. So, that growth hasn't been as fast. So, it's slowed down.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:06:03

KEVIN: Montréal, Vancouver, it's been relatively constant. And you have even your Ottawas and your Edmontons who have actually accelerated, even, the price growth, based again on stronger demand.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:06:18

JOELLE: So, I want to look specifically at turnover rent growth. And according to the report, if you're looking for your first rental apartment or you're looking to move into a new rental unit, you're going to pay 23.5% more than the previous tenant.

(Visual: The camera cuts to the single-person shot of host Joelle.)

0:06:33

JOELLE: I thought that was a significant number, 23.5% more. Can you talk about this trend in the turnover rent growth and what we've seen across the country?

(On-screen text: SUBSCRIBE)

(Visual: The camera cuts to the three-person shot of all participants.)

0:06:45

TANIA: Sure. So, we did introduce this new indicator which looks at turned-over units and turned-over rents. So basically, in other words, it's really a unit that is welcoming a new tenant. And so, it was quite eye-opening to see the difference between our classic indicator of rent growth, which we used to look at, and this turned-over rent growth. And so, you're right, we did see a 23% increase.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:07:13

TANIA: So, when we're looking at rent-controlled provinces, we're actually seeing that the difference is even greater. So, in fact, when you have a unit that is turned over, landlords are kind of using or tapping into that opportunity to increase the rent more significantly.

(Visual: The camera cuts to the three-person shot of all participants.)

0:07:35

TANIA: And so, in regions like Vancouver, Toronto or even Halifax, we're actually seeing even higher turnover rent growths. And so, for Toronto, for example, that was really the record high, when we're looking at Canada-wide data, which is actually 40%.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:07:54

JOELLE: You know, renters knowing that they're going to… If they move to another unit, they're going to be paying… You know, the national average is 23.5%, but as you mentioned, it does vary by region. Is that making them stay put or are they still interested in moving?

(Visual: The camera cuts to the single-person shot of host Joelle.)

0:08:10

TANIA: So, that's definitely limiting the number of tenants that are moving. So, it's really contributing to the fact that a lot more tenants are staying put, just because they will be facing higher rents if they're moving.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:08:27

TANIA: And so, this is really potentially signalling also some mismatch between the needs, the housing needs of the tenant, that may be changing, and what they currently have as a housing situation.

(Visual: The camera remains on the single-person shot of guest Tania.)

0:08:43

TANIA: So, we could even imagine a growing family, for example, that would need an additional room, or a couple that would likely be separating, but a lot of housing options are just maybe not available to them. And so, we might even think that what's hiding behind those numbers is a potential mismatch for some tenants, for sure.

(Visual: The camera remains on the single-person shot of guest Tania.)

0:09:09

KEVIN: This leads to what, in the academic literature, we call people who are either "overhoused" or "underhoused," and both are happening at the same time. So, you have people who would like to downsize, but they can't even afford a smaller apartment than they have because that is, you know… And then, the opposite, the family that you were just talking about. That example, they're underhoused and they can't find… There's a mismatch there.

(Visual: The camera cuts to the single-person shot of guest Kevin.)

0:09:35

JOELLE: So, Kevin, you mentioned that there are renters that are underhoused and overhoused. Can you elaborate a little bit more on that?

(Visual: The camera cuts to the three-person shot of all participants.)

0:09:43

KEVIN: Yes. So, as Tania was talking, mentioning before, there are quite likely situations where people, normally, could be living in a smaller unit, with less bedrooms, but they can't afford even a smaller unit. Which sounds kind of odd, but that is quite likely the situation.

(Visual: The camera remains on the three-person shot of all participants.)

0:10:02

KEVIN: And conversely, people who need a bigger apartment can't. And this leads to… You know, I think a question I'm asking myself a lot, these days, is… You know, we hear a lot of anecdotes about cohabitation, people living, sharing an apartment with many more roommates than, normally, the size of the unit would dictate. And you even hear of people sharing rooms.

(Visual: The camera cuts to the single-person shot of guest Kevin.)

0:10:29

KEVIN: You know, these are still anecdotes, but it's symptomatic, I think, of something. And I'm just wondering, to follow up on your question about the trend, if there were to be some… We see some easing, but I wonder if in the next rental market survey, it turns out that that easing has maybe prompted some of these people to move out and to seek these newly vacant units. We'll see in 12 months, but I think it's something I'm definitely going to follow.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:10:57

JOELLE: So, can you now, Kevin, walk us through the key factors that shaped rental demand in this last year? And then, also, dive a little deeper into how these trends varied across regions in Canada?

(Visual: The camera cuts to the three-person shot of all participants.)

0:11:12

KEVIN: So, we have your main factors, which are demographic factors and the labour market. These are usually the two main drivers. And so, we have seen, as I think everyone has seen over the past years, quite strong immigration, but also strong interprovincial migration. We tend to talk a lot about the international story, but there's also a lot of movements within Canada, which does also stimulate demand as well. So, that's been also at play.

(Visual: The camera cuts to the single-person shot of guest Kevin.)

0:11:38

KEVIN: Getting back to the international side, I think in July, we had over 1.2 million people, on an annual basis. So, that's quite a lot. And of course, when we look at housing, you're always looking at something that doesn't adapt as fast as you would want it, as for other goods, for example. So, you can't just increase production to…

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:12:02

KEVIN: So, that is definitely one story, and I think that that is… You know, despite what's happening now in the context of immigration or what can play itself out in the next year, that will still be… You know, the demographics of it will be important.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:12:17

KEVIN: I will add also that, when we look at the configuration of the Canadian population, we have aging of the population. We have people who are going more into years where they will probably want to downsize and be renters.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:12:33

KEVIN: You also have younger people who are at that stage of their lives where they want to form a household. Now, of course, with tight markets, that's not as easy. And so, the demographic side, be it migration or just the natural evolution of our age pyramid, is definitely one big factor.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:12:52

KEVIN: The job market is another one, and we've seen… Of course, it's eased a bit, this year. We've seen the unemployment rate go up a bit, but in general, it has been stimulating people to potentially form households. But you know, you may have a job, but if there is no… If you don't have an apartment, well, that's just not possible.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:13:16

KEVIN: And we've seen this in history, in markets in Canada, that there was job creation, but just not any supply. So, that's something, and we see that in different areas of the country, where you have labour markets that have softened a bit more and it has created a bit more difficulty, because there's not the jobs as much as there was, and others where the labour market is a bit more tight.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:13:43

JOELLE: And how do wages or wage growth factor into this, as well?

(Visual: The camera cuts to the single-person shot of host Joelle.)

0:13:47

KEVIN: Wage growth definitely factors in because obviously, it's what is required for them to meet their end of the month, really. And that has definitely not kept up as much, which is, you know, one of the big, one of the other…linked to the labour market, obviously, but it's definitely a reality that has not helped affordability.

(Visual: The camera cuts to the single-person shot of guest Kevin.)

0:14:10

JOELLE: So, I want to come back to that 30-year record high growth in supply and the new completions of purpose-built rental buildings. Why hasn't this record growth in completions led to or eased these affordability pressures that Kevin was just mentioning?

(Visual: The camera cuts to the three-person shot of all participants, before cutting to the single-person shot of host Joelle as she starts formulating her question to Tania.)

0:14:31

TANIA: Sure. So, we did, as you mentioned, see a big chunk of new supply that was added to the market, but we have to keep in mind that this newer stock is also higher-priced. And so, it's typically more expensive. And so, it will maybe be more suitable for a higher-income family, for example. And so, for mid-income families or low-income families, these new units are not affordable.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:15:02

TANIA: And so, there is a possibility that over time, through filtering, for example, these new units could lead to more affordable markets, but it does take time.

(Visual: The camera remains on the single-person shot of guest Tania.)

0:15:16

TANIA: So, basically, the concept of filtering is really that, as a building matures, it will eventually or could become more affordable for mid- or low-income families, in the long term. And so, we've done some research on that. So, that's available on our website, if you're interested in more details.

(Visual: The camera cuts to the three-person shot of all participants.)

0:15:37

TANIA: And to your question around, you know, why hasn't… You know, because of this record level of new supply, why hasn't it made the rental market more affordable? Another reason is: yes, we have record levels of new supply, but when we compare that or when we bring that per capita, we're not nearly close to the levels that we should be building to really feel that affordability easing, basically, in the market.

(Visual: The camera cuts to the single-person shot of guest Tania, before cutting back to the three-person shot of all participants while she is speaking.)

0:16:12

TANIA: And so, I do want to bring forward that, you know, conditions remain very tight in many regions in Canada, and affordability really remains a concern. We have a new indicator that we've included, actually during the pandemic, which is looking at units that are in arrears. So, we are looking at the units that have rent that hasn't been paid.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:16:41

TANIA: And so, when we compare that to the homeowner segment, for example, the difference is quite striking, actually. So, we have close to 8% of units in Canada that have a rent arrear, which is close to 32 times what we're seeing in the homeowner segment. So, the fact that it's higher is not necessarily surprising, but that difference is.

(Visual: The camera cuts to the three-person shot of all participants.)

0:17:07

TANIA: And so, just to give a little bit of perspective, that is close to 180,000 units in Canada that have a rent arrear. So, with this in mind, there's definitely other indicators, like when we're looking into delinquencies for credit cards, auto loans. Specifically for renters, we're seeing that those are also increasing at a higher pace. And so, you know, all of those elements together are really pointing towards certain financial pressure that is being felt amongst renters in Canada.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:17:45

JOELLE: So, I think you've both mentioned that we've seen an easing in the rental market this year. Is this the beginning of a trend? Like, can we say that is the beginning of a trend?

(On-screen text: SUBSCRIBE)

(Visual: The camera cuts to the three-person shot of all participants.)

0:17:57

KEVIN: That's a big question. We never usually use one year or one point of data to say that. I mean, it could be, but I think that…

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0:18:06

KEVIN: So, I mean, again, there has been some easing, which I think is probably somewhat of a relief to some people, for sure. But overall, you know, as we've been mentioning throughout our chat, there's a lot of headwinds that are still present.

(Visual: The camera remains on the three-person shot of all participants, before cutting to the single-person shot of guest Kevin while he is speaking.)

0:18:19

KEVIN: I think probably, we will be hovering around some of these levels. I mean, let's hope that it is the beginning of a trend, but we do have still a supply deficit that we have to tackle, as a country, and we also… You know, which is leading to affordability challenges.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:18:39

KEVIN: So, I think that this is the reason why we just keep monitoring this year after year. And you know, we've only scratched the surface, in this talk, about the data that's available. So, I think we'd encourage certainly people to dive into the numbers at the local level to see exactly what's the story where you live, whomever is listening to us and watching us today.

(Visual: The camera remains on the single-person shot of guest Kevin.)

0:19:04

TANIA: Absolutely, and I'd even add… I think it's a nice place to plug in the rental development survey that CMHC has been conducting with EY, Ernst & Young, for the past two years. And so, this survey, you know, asks questions to developers and investors in the purpose-built rental segment. Questions about their ability to make the math work, to be able to put new projects and get those shovels into the ground.

(Visual: The camera cuts to the single-person shot of guest Tania.)

0:19:34

TANIA: So, one of the results that we've seen this year is that there is some wave of optimism that is being felt among some developers. Again, it's very regional. Like Kevin said, we really encourage people to go see what's happening at the local level.

(Visual: The camera remains on the single-person shot of guest Tania.)

0:19:50

TANIA: But in some regions, we do see, feel this wave of optimism, due to the fact that, you know, construction costs are increasing, but at a slower pace. You know, that support that I was mentioning around government, at all levels of government, is definitely contributing to some extent, in some markets.

(Visual: The camera remains on the single-person shot of guest Tania.)

0:20 :14

TANIA: And also, the easing of the monetary policy. So, interest rates declining is also helping make the math work for developers and hopefully contributing to maybe more projects, as we move forward.

(Visual: The camera cuts to the three-person shot of all participants.)

0:20:31

JOELLE: So, that's a wrap on today's podcast. I want to thank you both for joining me today and walking us through the key insights and the key findings of our latest Rental Market Report.

(Visual: The camera cuts to the single-person shot of host Joelle.)

0:20:42

JOELLE: And Tania, as you mentioned, if our listeners today are interested, we have the link to the full Rental Market Report in the description of our podcast. So, they can just grab that, copy-paste it into their browser and then, they can explore more national findings and also take a deeper dive into the regions that they all hail from.

(Visual: The camera cuts to the three-person shot of all participants, before cutting to the single-person shot of host Joelle while she is speaking.)

0:21:04

JOELLE: So, I want to say a big thank you to our listeners for joining us again today, in-house.

(Visual: The camera cuts to the three-person shot of all participants.)

0:21:10

NARRATOR: Did you know we're not just on YouTube? You can now find us on Spotify, Apple Podcasts and Amazon Music.

(On-screen text: In-House, Canada's Housing Podcast)

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0:21:17

NARRATOR: Don't miss our next episodes for more real, data-driven discussions. If you're learning from and/or enjoying this podcast, please share this episode, follow us or subscribe.

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0:21:29

NARRATOR: Reach out! Let us know what you think. Thanks for listening, and see you next time.

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(Visual: Animated transition to the logos of CMHC and the Government of Canada.)