Where Canadian Rents Are Headed in 2026: What the Data Says

For the past three years, the default assumption in Canadian rental property analysis was simple: rents go up. Tight vacancy, surging immigration, and constrained supply made aggressive rent growth assumptions feel conservative. That picture changed in 2025, and the data from CMHC's 2025 Rental Market Report tells a more complicated story heading into 2026.

This post walks through what the data actually shows, breaks it down by major market, and explains what it means practically when you are setting rent growth assumptions in your deal analysis.

The National Picture: Vacancy Up, Rent Growth Slowing

According to CMHC's 2025 Rental Market Report, the national vacancy rate for purpose-built rental apartments rose to 3.1% in October 2025, up from 2.2% in 2024 and above the national 10-year average. This is a meaningful shift from 2023's record low of 1.5%.

At the same time, the average rent for a two-bedroom purpose-built apartment grew 5.1% to $1,550, down from 5.4% growth in 2024. The headline number still looks positive, but the direction of travel is clear: rent growth is decelerating as vacancy rises and landlords compete harder for tenants.

CMHC deputy chief economist Tania Bourassa-Ochoa described it plainly: the tight conditions that defined rental markets in the past few years loosened in 2025. Purpose-built operators responded by offering incentives including free rent months, moving allowances, and signing bonuses.

Two forces drove the shift. On the supply side, rental completions hit historically high levels, particularly in Calgary, Edmonton, and Montreal. On the demand side, slower population growth, declining international student enrollment, and rising youth unemployment reduced renter household formation faster than the market had priced in.

Market-by-Market Breakdown

The national number masks significant regional variation. The story in Toronto is different from Calgary, which is different from Vancouver. Here is what CMHC reported for each major market.

A few points worth highlighting. Vancouver's 3.7% vacancy is the highest since 1988. Toronto hit 3.0% for the first time since the pandemic. Both cities had vacancy rates below 1.5% just two years ago. Calgary's 5.0% looks elevated but is stable, which is notable given that purpose-built rental supply expanded 11% in 2025 alone. Demand absorbed that supply and kept vacancy flat.

Montreal's rent growth of 7.2% stands out in the other direction. That figure was driven largely by lease renewal increases, not market rents on new leases. It illustrates an important distinction CMHC draws throughout the report: the rent a new tenant pays and the rent an existing tenant pays are very different numbers.

Turnover Rents vs. In-Place Rents: Why the Gap Matters

CMHC tracks two rent figures: non-turnover rents, which are rents paid by existing tenants on unchanged leases, and turnover rents, which are rents set when a unit is re-leased to a new tenant. For much of 2022 and 2023, turnover rents surged far above in-place rents as landlords repriced aggressively at vacancy. That gap has now started to close.

In Toronto, Vancouver, Calgary, and Halifax, the average asking rent for a two-bedroom unit declined between 2% and 8% year-over-year in Q1 2025 compared to Q1 2024. That is a direct reversal from the prior two years of sharp asking rent increases.

CMHC's forward-looking statement is explicit: as turnover rents continue to soften, landlords will have less room to raise rents when a new tenant takes over a unit, and turnover-driven rent increases are likely to moderate. The gap between what a new tenant pays and what an existing tenant pays is expected to shrink further in 2026.

For investors in Ontario, rent control on pre-2018 units means in-place rents are already capped at the guideline. The gap between capped in-place rent and market rent is the upside you can only capture at turnover. When turnover rents decline, that upside shrinks. For a full breakdown of how the 2026 rent guideline affects cash flow over time, see Ontario Rent Control in 2026.

What CMHC Expects for 2026

CMHC's forward guidance from the 2025 report is clear on three points. First, vacancy rates are likely to remain elevated in 2026 as more rental units already under construction continue to complete. The pipeline built during the high-start years of 2022 and 2023 has not fully delivered yet. Second, rent increases are expected to slow further, providing some relief to renters. Third, affordability may improve modestly if income growth keeps pace with the smaller rent increases.

CMHC is also explicit that this does not mean the market has structurally flipped. Affordability remains a challenge, particularly for lower-income households. The supply of units affordable to lower-income renters is still very low. The easing has been concentrated in higher-end new product, with a filtering effect that takes years to reach more affordable price points.

What This Means for Your Deal Analysis

The practical implication for investors is that the rent growth assumptions baked into deals underwritten in 2021 and 2022 no longer reflect market reality in most Canadian cities. Here is how to think about rent assumptions in your analysis today.

Conservative base case: Model 1.5% to 2.5% annual rent growth in Toronto, Vancouver, and Calgary for 2026 and 2027. This reflects the current deceleration trend and is roughly in line with or slightly above CPI. Using 4% or 5% rent growth in these markets right now is optimistic.

Vacancy assumption: With national vacancy at 3.1% and rising in most major markets, modeling 4% to 6% vacancy is now more defensible than the 2% to 3% figures that investors were using at the top of the market. New builds in particular face longer lease-up periods and should be modeled conservatively.

Downside scenario: In a scenario where vacancy continues rising and turnover rents decline a further 2% to 4%, annual effective rent growth on a stabilized asset could be flat to slightly negative for 12 to 24 months. This is not the base case, but it is within the plausible range for markets like Toronto and Vancouver where supply continues to deliver.

Rental Analyst's 30-Year View tab lets you set your rent growth assumption and see the compounded impact across your full hold period. The difference between 2% and 4% annual rent growth over 20 years is substantial. Running both scenarios before you buy is the right approach in the current environment.

The Longer-Term Structural Case Still Holds

None of this means Canadian rental demand is broken. Canada's long-term housing supply deficit is real. Immigration targets, even reduced ones, will continue to add renters faster than ownership formation can absorb them. The current supply surge is concentrated in purpose-built and high-end product. The pipeline for affordable rental units remains structurally undersupplied.

What has changed is the short-term dynamic. Investors who assumed perpetually tight vacancy and above-CPI rent growth as a baseline will need to revise their models. The deals that work in a 2% rent growth environment with 5% vacancy are the deals worth buying. The ones that only work with 4% rent growth and 2% vacancy are carrying assumptions the data no longer supports.

This post is for informational purposes only and does not constitute financial, legal, mortgage, or tax advice. Vacancy and rent data sourced from CMHC's 2025 Rental Market Report (October 2025 survey, released December 2025) and CMHC's 2025 Mid-Year Rental Market Update. Market conditions change. Verify current data before making any investment decision.