Canada’s rental market is being pulled in two directions at once. On one side, federal immigration cuts are expected to soften demand for rental units after years of intense pressure from newcomers. On the other, housing economists warn that construction — particularly of condos, a key source of rental supply — is slowing even faster than demand, leaving a structural shortage that could resurface as soon as population growth picks back up.
Immigration Cuts Cooling Rental Demand
According to RBC economists, the recent pullback in immigration will be felt most acutely in the rental sector rather than in homeownership markets. Newcomers, especially temporary residents, typically rent for their first five to ten years in Canada, meaning fewer arrivals translates fairly directly into softer rental demand. RBC’s mid-year housing outlook noted that while this immigration slowdown poses a real headwind, it is likely to be outweighed on the ownership side by hundreds of thousands of sidelined would-be buyers finally entering the market. The rental sector, by contrast, does not have that same offsetting pool of pent-up demand.
Housing Starts Lag Behind Long-Term Needs
Canada Mortgage and Housing Corporation’s latest supply gap report found that the country needs a substantial ramp-up in new housing — spanning both ownership and rental units — over the next decade to bring affordability back toward 2019 levels. Yet CMHC deputy chief economist Aled ab Iorwerth warned that construction is slowing faster than demand, even as population growth is expected to recover in most major cities. “The key risk now is Canada underbuilds during this softer market and finds itself further short of housing when demand strengthens again,” he said.
Canada recorded 131,851 housing starts through July of this year, down four per cent from the same period in 2025. CMHC said that at the current pace, the country is on track to add roughly 231,000 units annually over the next decade — well short of what’s needed to restore pre-pandemic affordability by 2036. The report flagged weak condominium market conditions and difficult presale financing as key reasons developers are pulling back, a dynamic with direct implications for rental supply since condos have historically fed a large share of Canada’s rental stock. In Montreal, CMHC noted that while overall construction remains relatively high, new supply is concentrated in purpose-built rental housing rather than ownership units, even as the city’s broader housing supply gap has grown compared with a year ago.
Ontario Tightens Rules for Landlords and Tenants
Against this backdrop of tight and shifting supply, Ontario introduced a second wave of amendments to its Residential Tenancies Act on September 21, following an initial round of changes in July. Drawn from Bill 60 and Bill 97, the new rules cut the repayment window for tenants in arrears from 14 days to seven before landlords can file an eviction application with the Landlord and Tenant Board. The amendments also create a statutory definition of “persistent late payment” — rent paid more than seven days late on at least three occasions within six months — and adjust compensation requirements for landlords issuing N12 notices for personal or family use, provided at least 120 days’ notice is given. Tenants seeking to raise separate complaints, such as maintenance issues, at an eviction hearing must now pay 50 per cent of the alleged overdue rent before those issues can be considered.
The changes arrive as Ontario’s rental and condo investment landscape faces its own pressures. Unsold new condo inventory in the Greater Toronto Hamilton Area hit a 35-year low in the first quarter of 2026, according to reporting by Canadian Mortgage Professional. Toronto-area mortgage broker Micky Khaneka of MKG Mortgages said the challenges facing the condo market suggest “it might be a little bit longer before that starts to be absorbed.” A rental market report from Rentals.ca and Urbanation for August put the national asking rent at $2,035, while apartment and condo rents in Toronto climbed 1.6 per cent between June and August to reach $2,577.
Canadian rental market snapshot
Regional Divergence Continues
RBC’s August market tracking shows how unevenly Canada’s broader housing conditions — which shape rental dynamics in each city — are playing out. Toronto’s tentative recovery faltered, with resales falling 1.3 per cent and new listings down 14 per cent year-over-year, a supply squeeze RBC linked partly to a sharp two-year contraction in condo starts. Vancouver remains the weakest of Canada’s six largest markets despite an 8.5 per cent monthly bounce in resales, while Calgary cooled further as condo prices sat eight per cent below year-ago levels. Montreal continued to see new listings climb, though RBC said affordability there remains near an all-time worst, with expanding rental supply seen as one factor that could eventually ease pressure on the broader market.
Taken together, the trends point to a rental market where slower immigration is tempering demand growth in some regions, even as construction — especially of condos — continues to lag the pace needed to close Canada’s long-term supply gap, and provinces like Ontario recalibrate the rules governing landlords and tenants alike.
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