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Is Canada becoming a nation of renters?

In today’s Konfidis Insights we profile a recent RBC Thought Piece: Proof Point - Is Canada becoming a nation of renters? The report opines the following:


  • The ranks of Canadian renters is growing fast; renters have increased at three times the rate of homeowners in the past decade.

  • The shift to renting has been widespread across age groups and areas, though younger Canadians and urbanites still make up the largest group.

  • Growth in rentership is now strongest in smaller cities.


The bottom line: The rapid growth in renters isn’t about to slow down. The affordability pressures, demographic forces, and behavioural preferences currently driving this change will continue to fuel it in the years ahead. Concerted efforts among policymakers, developers and builders are required to ensure, expand and diversify Canada’s stock of suitable, affordable, and stable rental housing.


The underlying data is sourced from Statistics Canada household maintainer and related records.

 

The rise of the renters


There have never been so many renters in Canada. According to the 2021 Census, almost 5 million households rented the home they lived in last year—up from 4.1 million a decade earlier. And while owner households still dominate the Canadian landscape by a ratio of two-to-one, renters accounted for most of the growth over the past 10 years. Rentership increased by 876,000 households (or 22%) compared to a rise of 770,000 (8%) in owner households.


Millennials are renting for longer than previous generations


Renting used to be a swift rite of passage to buying a first home. But there’s ample evidence that younger generations of Canadians aren’t progressing up the housing ladder (from rental housing to starter homes to larger homes) quite so fast. Indeed, data suggests millennials’ ownership rates are lagging those of previous generations at the same age. And millennials are lingering in rentership three to five years longer than their baby boomer counterparts.


Enter the boomers: rentership not just a young, urban phenomenon


Between 2011 and 2021, baby boomers (born 1946 to 1964, and the largest generation of Canadians) surpassed millennials (born 1981 to 1996) as the fastest growing group of renters (+4%). Additionally, the share of renter households has increased across municipalities of all sizes. At 22%, renter growth over the last ten years was slightly stronger in smaller cities (census agglomeration areas) than in larger cities (census metropolitan areas) at 21%. The widespread shift toward renting suggests affordability issues in large urban areas may not be the only driving force.


Demographic trends also fuel rental demand


Rising immigration and an aging population are also supporting rental demand. Given most newcomers typically rent for the first five to ten years of living in Canada, rapidly growing immigration targets (rising from 250,000 in 2011 to more than 401,000 in 2021) have significantly boosted demand for rental housing. Of the one million recent immigrants (a landed immigrant or permanent resident for five years or less) living in private dwellings, 56% (640,700) were living in rented accommodation in 2018. That’s nearly two-times the national average, leaving immigrants to represent a disproportionately high share of rental households in Canada.


Canada’s aging population has also bolstered demand. Of the 5 million tenant-occupied dwellings recorded in 2021, nearly a quarter (22%) were occupied by seniors aged 65+. That’s a 3 percentage-point increase from the 19% share reported in 2011.


And more Canadians are choosing to live alone. Since two incomes are often necessary to cover the high costs of ownership, many of these individuals end up renting. As of 2016, persons living alone overtook married couples as the most prominent household type, representing nearly 30% of all households in 2021.


We expect these demographic and behavioural trends to continue fueling demand for rental housing in the years ahead.


Wider array of rental housing needed


Burgeoning rentership will put tremendous pressure on our rental stock—already stretched and inadequate in many parts of the country. We’ll need to build more rental units. A lot more. And they’ll have to be the right kinds of units to meet the population’s increasingly diverse needs and income levels. This includes rental options suitable for families—that is, in neighborhoods close to schools and other amenities. The sharp rise in renter households living in single and semi-detached homes (+33%) over the last 10 years also speaks to a growing need for rental housing in lower density areas.


We believe addressing the so-called “missing middle” in some of Canada’s largest cities would go a long way toward broadening rental options. And as the federal and some provincial (e.g. Ontario) governments aim to double housing construction over the next decade, there’s a golden opportunity to do just that through the right mix of policies, regulatory changes and incentives.


Konfidis Deep Dive


As always, at Konfidis, we dig in beyond the headlines. Looking across core Ontario markets, we see a consistent increase in the percentage of renter households over the last five years, with Windsor as the sole outlier. London, Kingston, and the Kitchener-Cambridge-Waterloo areas are the markets with the highest percentage of renters; however, Oshawa and Barrie have experienced the highest growth in proportion of renters over this period.




Konfidis Insight


The trend of an increasing renter nation bolsters the Konfidis thesis vis-à-vis the single-family rental (SFR) investment landscape. However, what is not detailed in this report is the quality and type of rental properties available to Canadian families. The data highlights an increased demand for single-family detached rental alternatives in smaller cities. Unfortunately, the supply of such rental solutions is scarce as the vast majority of rental options are concentrated in urban high-rise condos.


Konfidis and its partners provide a professional rental solution to prospective tenants and are aligned with tenants as it seeks to establish a brand and reputation of trust with Canadian families and communities. Further, professional long-term ownership provides tenants with security of tenure, without the constant fear of eviction from mom-and-pop owners.


And with this backdrop, Konfidis continues to see a very compelling landscape for single-family rental ownership in Ontario’s secondary markets as the long-term supply and demand fundamentals that support strong home price appreciation and inflation protection.




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