What do decreasing rents mean for landlords and tenants?

It’s rare to hear good news about housing costs in Canada but recent reports suggest that there’s been a noteworthy shift in the country’s rental market, with rents decreasing in urban centers like Toronto, Vancouver, Montreal and Calgary.

This trend is the first decrease in years, but will it be long lasting and significant enough to ease pressure on the housing market in some of Canada’s major cities? This article will examine the trend and consider how it could impact landlords and tenants.  

Rents have dipped across the country

A January 2025 rent report by Rentals.ca and Urbanation shows that, by the end of 2024, average rents for all residential property types (houses, condos and apartments) in the country decreased by 3.2% compared to rents in 2023, marking a 17-month low of $2,109 in December of 2024. This is the largest decrease since 2020 at the beginning of the pandemic when rents decreased by a little over 5%.

In Toronto, Canada’s largest rental market, rents decreased by 7.1% with the average rent being $2,632. In Vancouver, another city infamous for its sky-high property costs, rents decreased by 6%, with an average rent of $2,882. Cities like Calgary (6% decrease), Mississauga (4% decrease) and Montreal (1% decrease) also saw drops in monthly rental costs.

What’s causing the decrease?

There are numerous factors that have contributed to the decrease in rent, with the main issues being a loosening of rental supply, a glut of condos (in major cities like Toronto) and immigration policies from the federal government. Understanding how these issues intersect is key to getting a better overall picture of why rents in Canada are decreasing.

“It’s a combination of demand and supply,” notes Shaun Hildebrand, president of Urbanation. “The population is currently experiencing slower growth overall and is starting to decline in terms of the number of non-permanent residents, almost all of whom rent.”

He points to the government’s decision to lower immigration numbers over the coming years as a cause of the declining demand, as well as higher unemployment rates in major cities.

 “On the supply side, Canada is experiencing a multi-decade high for apartment completions,” he says. “In places like Toronto, condo completions are also soaring, which leads to a lot of new rental listings as most new condos are owned by investors.”

Related: Should I use a real estate agent to find a rental in Toronto?

What does this mean for landlords?

The trend of decreasing rents may turn out to be both a challenge and an opportunity for landlords. For some landlords, it may be an incentive to do some renovations and upgrade appliances to make a unit more attractive to potential tenants.

However, rents can’t fall too much or indefinitely, points out Rose Marie, Vice Chair of SOLO (Small Ownership Landlords of Ontario) because landlord’s have to find a way to recoup ever-increasing costs.

“Expenses like insurance and taxes continue to rise, as do the costs of keeping up with new rental regulations adopted by municipalities,” says Rose, adding that those costs will have to be passed onto the tenant to make renting out a unit worth it for landlords. “For example, several municipalities have implemented rental licensing regimes, and those additional costs will eventually be passed on to tenants.”

Related: While 70% are mortgages are up for renewal, one third of Ontario homeowners may be unable to afford higher payments: a survey 

What does this mean for tenants?

While decreasing rents may appear to be a boon for tenants and may give them a bit more bargaining power, the reality may not be so straightforward.

“For the majority of tenants, the rent decrease does not mean much,” says Laura Murphy, the Senior Housing Policy Advisor for the Advocacy Centre for Tenants Ontario. “While the average asking rents might be slightly lower, the incomes required to afford these homes are still out of reach for many, especially those already dealing with affordability challenges.”

According to Murphy, the average minimum income needed to afford a two-bedroom condo or apartment in Ontario was $107,976 in 2023 and $102,765 in 2024.

Murphy emphasizes that small rental decreases are not a tangible or long-term solution to creating more affordable housing.

“Both our federal and provincial governments need to invest in maintaining and expanding our public housing supply,” she says. “To ensure that current public rental housing is not lost to expiring operating agreements…. And more housing needs to be acquired that is geared towards renters spending less than 30% of their incomes on rents.”

Related: How do high interest rates impact Canadian renters?

Are rentals finally becoming affordable?

Lest we become too optimistic about falling rents and affordability, it’s important to note that the Rentals.ca report states that despite the monthly decreases in rent, rents over the last five years have increased by 16.8% (an average of 3.15% per year) overall.

Whether or not rents continue to decrease will depend on a confluence of factors, including things like housing supply dynamics, rent control regulations and immigration. However, as long as the country has an overall shortage of affordable housing, rents are unlikely to decrease significantly for long.

Hildebrand isn’t holding her breath for long-term rental decreases. She predicts that the market will tighten back up in the medium-term.

“It’s a rare moment in the market for tenants — they should take advantage of reduced rents while they can,” she says. “The current slowdown in apartment construction starts is very significant. In a couple years, supply will stagnate and competition among tenants will heat back up again.”

Read next: How does co-op housing work in Canada?