Why Apartment Rents Are Falling in Toronto, Vancouver, and Montreal (Early 2025)

Overview: After several years of surging rents, Canada’s largest cities are now seeing a dip in apartment rental prices. Toronto and Vancouver average rents have fallen to their lowest levels in roughly 30+ months (Asking Rents See First Monthly Increase in Six Months), and Montreal’s rents have also declined. This report examines the drivers behind falling rents – from a flood of new supply and returning Airbnb units, to shifting demand patterns, economic pressures, and policy changes – supported by the latest data as of early 2025. Key indicators like rent levels, vacancy rates, and housing construction are presented for each city.

Recent Rent Trends and Key Metrics

(Asking Rents See First Monthly Increase in Six Months) Average asking rents for purpose-built and condo apartments in Canada’s six largest markets (Toronto in blue, Vancouver in teal, Montreal in pink, etc.) from March 2023 to March 2025. Toronto and Vancouver rents peaked in mid-2023 and have since declined into early 2025 (Asking Rents See First Monthly Increase in Six Months).

To set the stage, Table 1 summarizes current rent levels, year-over-year changes, and rental vacancy rates:

City	Avg. Rent (Mar 2025)	YoY Rent Change	Vacancy Rate (2024)
Toronto	$2,589 (Asking Rents See First Monthly Increase in Six Months)	-6.9% (Asking Rents See First Monthly Increase in Six Months)	~2.0% (up from ~1.4% in 2023) ([Fall 2024 Rental Market Report
Vancouver	$2,822 (Asking Rents See First Monthly Increase in Six Months)	-5.7% (Asking Rents See First Monthly Increase in Six Months)	~1.6% (up from <1% in 2023) (Asking Rents See First Monthly Increase in Six Months) ([Fall 2024 Rental Market Report
Montreal	$1,968 (Asking Rents See First Monthly Increase in Six Months)	-4.0% (Asking Rents See First Monthly Increase in Six Months)	~2.1% (up from ~1.5% in 2023) (Asking Rents See First Monthly Increase in Six Months) (Montreal’s vacancy rate is going up, but so is rent – CTV News)

Table 1: Average asking rents (all apartment types), year-over-year change, and vacancy rates for purpose-built rentals. Sources: Rentals.ca/Urbanation Rent Report (Mar 2025) and CMHC Rental Market Survey.

As shown above, Toronto’s average rent has dropped to about $2,589, down 6.9% from a year ago, and Vancouver’s to $2,822, down 5.7% (Asking Rents See First Monthly Increase in Six Months). Montreal’s average (~$1,968) is 4% lower year-over-year (Asking Rents See First Monthly Increase in Six Months). These declines mark a sharp reversal from the rent spikes of 2022–2023. Vacancy rates, while still relatively low, have edged up in all three cities (e.g. Montreal’s vacancy rose to ~2.1%, from 1.5% a year prior – a “healthy” rate is ~3% (Montreal’s vacancy rate is going up, but so is rent – CTV News)). The cooling rents and rising vacancies can be attributed to several converging factors, explored below.

Surge in Rental Supply (New Construction & Airbnb Units)

1. Record Completions of New Apartments: A wave of new housing supply has hit the rental market. 2024 saw the largest increase in purpose-built rental stock in over 30 years – a 4.1% jump in supply nationwide (Rental supply gains help cool pace of rent growth in 2024: CMHC – Mortgage Rates & Mortgage Broker News in Canada). In the Greater Toronto Area (GTA) alone, nearly 30,000 new condo units were completed in 2024, and roughly half of these ended up as rentals (GTHA Rental Vacancy Highest Since Pandemic | Urbanation). This influx has pushed Toronto’s condo rental listings to record highs, and dragged the average condo rent down ~4–5% year-over-year to about $2,680 by late 2024 (GTHA Rental Vacancy Highest Since Pandemic | Urbanation). Urbanation reports the GTA’s rental vacancy reached 3.4% in Q4 2024 (up from 2.5%), the highest since 2021 (GTHA Rental Vacancy Highest Since Pandemic | Urbanation), as “high asking rents and increased supply competition” made it harder for landlords to fill units (GTHA Rental Vacancy Highest Since Pandemic | Urbanation).

Other cities have also ramped up construction. Montreal led in new rental builds – 7,192 new rental units were started in the first half of 2024, a 106% increase from the prior year (Record rental construction drives housing starts in Canada’s largest cities | CMHC) (Record rental construction drives housing starts in Canada’s largest cities | CMHC). Developers, buoyed by government incentives, focused on rental apartments, which made up nearly half of all multi-unit housing starts in major metros in 2024 (Record rental construction drives housing starts in Canada’s largest cities | CMHC) (Record rental construction drives housing starts in Canada’s largest cities | CMHC). Even though housing starts actually slowed for condos in Toronto and Vancouver (as high financing costs deterred investors) (Record rental construction drives housing starts in Canada’s largest cities | CMHC), the pipeline of projects already under construction meant apartment completions hit record highs in 2024 for Toronto and most big cities (Record rental construction drives housing starts in Canada’s largest cities | CMHC). In short, supply finally caught up with demand growth in late 2024, easing the pressure on rents.

2. Short-Term Rentals Returning to Long-Term Market: Another boost to supply has come from Airbnb and other short-term rentals converting back to long-term units. Major cities and provinces have tightened regulations on short-term rentals, opening up more units for local renters. For example, Toronto’s 2019-2021 short-term rental rules (which restrict Airbnb-style rentals to one’s primary residence) are estimated to have returned between 3,320 and 5,100 housing units to the long-term rental market (STR – Attachment 4). In Montreal, following a tragic fire in an illegal Airbnb, the city in 2024 enacted a strict bylaw limiting short-term rentals to summer months. The mayor expects this to return ~2,000 units to long-term rentals (Two years after fatal fire, Montreal tightens rules on short-term rentals like Airbnb – Mortgage Rates & Mortgage Broker News in Canada). And in British Columbia, a new provincial law (effective May 2024) will severely limit short-term rentals to principal residences; with over 19,000 entire homes listed as short-term rentals in BC, officials anticipate that even half of those coming back on the rental market (roughly 9,000 units) would be “substantial” relief (Thousands of short-term rentals in B.C. go back to long-term May 1: B.C. government) (Thousands of short-term rentals in B.C. go back to long-term May 1: B.C. government). In Vancouver – a city that already had an empty homes tax and Airbnb rules – these additional measures further increase the available rental supply.

3. Investors Renting Out Units: High interest rates and a cooling resale housing market have also compelled many investors to lease out units they might have otherwise sold. In Toronto, a record number of condos completed in 2023-24 were bought by investors; with softer resale conditions, owners chose to lease them despite negative cash flows (Fall 2024 Rental Market Report | CMHC). This pushed Toronto’s share of condos being rented to 41% – the highest of any Canadian city (Fall 2024 Rental Market Report | CMHC). Similarly, more homeowners in expensive markets are renting out basements or rooms to cover mortgage costs. These trends added to the “supply glut” of rentals, forcing landlords to compete (sometimes even offering incentives) to attract tenants in 2024 (Fall 2024 Rental Market Report | CMHC) (Fall 2024 Rental Market Report | CMHC).

In summary, new supply – from record construction completions to formerly short-term units – has markedly increased the number of rentals on the market. This increase in rental inventory is a primary reason rents have softened, as landlords face more competition to fill units than in previous years.

Shifts in Demand and Renter Behavior

At the same time, there have been subtle shifts in demand that tempered the relentless competition for rentals:

1. Internal Migration and Population Distribution: Canada’s population growth hit record highs in 2022–2024, especially in big cities (Toronto CMA grew ~3.9% and Montreal ~2.9% in the year to July 2024) (The Daily — Canada’s population estimates: Subprovincial areas, 2024) (The Daily — Canada’s population estimates: Subprovincial areas, 2024), largely due to immigration. However, within Canada, many residents have been relocating away from Toronto, Vancouver, and Montreal in search of affordability. High costs and remote work opportunities led to an exodus of Canadians from Ontario and B.C. to provinces like Alberta in recent years. Between mid-2023 and mid-2024, Ontario saw a net interprovincial loss of around 25,000 people (many from the Toronto area), while Alberta gained nearly 44,000 interprovincially (Alberta Called. I Shouldn’t Have Answered. – Macleans.ca). As BMO economists noted, “the two biggest losers [of interprovincial migrants] are BC and Ontario, where people continue to flee the sky-high cost of living” (Canadians Still Moving To Alberta, East Coast Appeal Fizzles Out: BMO – Better Dwelling). This means some would-be renters in Toronto or Vancouver have instead moved to more affordable cities, slightly diminishing local rental demand at the margin.

2. Remote Work and Urban Out-Migration: The rise of remote and hybrid work has reduced the need for some workers to live in city centres. A portion of renters who came to downtown Toronto or Vancouver for jobs are now choosing suburban or smaller-city living since they can work remotely. This trend, which began in the pandemic, continued to “right-size” urban demand in 2023–2024. Downtown rental markets, particularly for tiny condos, have felt this shift – in Toronto, rents for the smallest units (under 500 sq ft) fell 6–9% in the past year (GTHA Rental Vacancy Highest Since Pandemic | Urbanation) (GTHA Rental Vacancy Highest Since Pandemic | Urbanation), suggesting young professionals are less inclined to pay a premium for micro-apartments when they could work from elsewhere. Montreal has also seen some young people opt for suburban areas or move to other provinces, moderating demand growth in the city.

3. Affordability Constraints: After years of steep rent hikes (Toronto and Vancouver rents rose ~20-30% in 2022-2023), many renters hit their affordability limit. By 2024, rents had risen faster than wages, squeezing budgets (Fall 2024 Rental Market Report | CMHC). In response, more renters have been doubling up or delaying household formation – e.g. getting roommates, staying with parents longer, or keeping the same apartment instead of moving. This behavioral shift effectively curbs demand for additional rental units. Landlords in Toronto observed “persistently low tenant turnover” in 2024 (Fall 2024 Rental Market Report | CMHC) – renters are staying put, in part because moving to a new rental at higher market rates became unaffordable. Low turnover means fewer new lease-ups, which contributed to the slower rent growth (and now declines) as vacancies ticked up.

It’s important to note that overall demand remains strong – indeed international immigration has added tens of thousands of new renters in these cities. But relative to the huge surge in supply, demand growth has been slightly outpaced. Even a modest easing in the demand pressure (from Canadians leaving, remote work dispersion, and renters resisting price hikes) has allowed the increased supply to translate into higher vacancy and lower rents. As CMHC put it, in some cities the “record level growth in supply outpaced strong demand,” leading to higher vacancies and cooling rents (Fall 2024 Rental Market Report | CMHC) (Fall 2024 Rental Market Report | CMHC).

Economic Pressures: Interest Rates, Inflation, and Jobs

Economic conditions over the past year have created a push-pull effect on the rental market:

1. High Interest Rates Keeping Renters in Place (but also boosting supply): The Bank of Canada’s rapid rate hikes (peaking in 2023) made it much harder for renters to transition into homeownership, locking many households into renting longer. Normally, this would increase rental demand – and indeed it did keep demand robust through 2023. However, the flip side is that high interest rates also discouraged investor-buyers and cooled the ownership market. In Toronto and Vancouver, pre-construction condo sales plunged in 2023 (Record rental construction drives housing starts in Canada’s largest cities | CMHC), which will limit future rental supply but had the short-term effect of pushing current investors to rent out units they already owned (as discussed earlier). Additionally, some highly leveraged landlords facing higher mortgage payments have been eager to find tenants quickly (even at lower rent) to offset costs, rather than leave units vacant. On balance, elevated rates have mixed effects: they keep renters renting (supporting demand), but they also forced more units onto the rental market (boosting supply in 2024) when resale selling wasn’t attractive.

2. Inflation and Cost of Living: Broader inflation in food, gas, and essentials – which peaked in 2022 and remained above normal in 2023 – means renters have less disposable income for housing. Renters became price-sensitive: if asking rents were too high, many simply could not afford them, forcing landlords to moderate increases or offer slightly lower rents to fill vacancies. The CMHC 2024 Rental Report noted that despite slower rent growth, “renter affordability remained strained” and rent arrears (missed rent) stayed high (Fall 2024 Rental Market Report | CMHC). In essence, landlords hit a ceiling on what many tenants could pay, especially as wage growth lagged rent growth. This economic reality put downward pressure on rent prices – the market had to adjust to what renters could actually pay.

3. Job Market and Economic Uncertainty: The job market in late 2024 showed some softening compared to the ultra-low unemployment of 2022. Certain high-paying sectors that drive rental demand, like tech, saw layoffs in Toronto and Vancouver in 2023. If fewer new well-paid young workers are arriving in the city (or if some who lost jobs left), that can reduce demand for premium rentals. Moreover, general economic uncertainty can make people cautious – some potential renters might delay moving out on their own or opt for cheaper housing when headlines warn of a possible downturn. While Canada avoided a recession in 2024, consumer sentiment was cooler. All told, the economic backdrop curbed renters’ appetite (or ability) to chase ever-higher rents, which contributed to the stabilization and slight decline of rents.

Policy Impacts and Government Measures

Government policies on housing have begun to influence the rental landscape:

1. Rent Control and Tenant Protections: Ontario, BC, and Quebec all have forms of rent control (limiting annual rent increases for existing tenants to a guideline, unless a unit is new or turns over). In 2024, Ontario’s guideline was 2.5%, BC’s 2.0%, and Quebec’s effective increases often around inflation. These controls meant that many sitting tenants in older units had capped rent increases, which kept average rents in check and discouraged tenant turnover. CMHC pointed out that Toronto’s rent growth was lowest in 2024 partly “for occupied units under rent control, landlords had limited ability to raise rents” (Fall 2024 Rental Market Report | CMHC). Meanwhile, landlords in purpose-built rentals focused on tenant retention – “prioritiz[ing] keeping existing tenants by taking a cautious approach to rent increases” (Fall 2024 Rental Market Report | CMHC) – since pushing rents too high would cause move-outs. In Vancouver and Montreal, slightly higher turnover in 2024 allowed some rent hikes, but rent control still moderated the pace (Fall 2024 Rental Market Report | CMHC). The net effect of these policies is a flattening of rent growth for many units, contributing to the overall market cooling. (It’s worth noting that rent control doesn’t lower rents, but in a high-inflation environment it slowed their rise, which helped create conditions for the recent declines once supply increased.)

2. Government Incentives for Rental Construction: To address the housing crisis, governments have rolled out incentives specifically for rentals – which are now bearing fruit. The federal government removed GST (5% tax) on new purpose-built rental projects in late 2023 to spur development, and several provinces followed by removing their portion of HST. Additionally, programs like CMHC’s low-interest loans for rental construction and various municipal incentives have encouraged developers to build rentals despite high interest rates. According to CMHC, these initiatives helped drive rental housing starts to record levels in 2024 (Record rental construction drives housing starts in Canada’s largest cities | CMHC) (Record rental construction drives housing starts in Canada’s largest cities | CMHC). For example, “construction of rental housing, supported by many government incentives and policies, made up the highest share of apartment starts on record (47%)” in the first half of 2024 (Record rental construction drives housing starts in Canada’s largest cities | CMHC) (Record rental construction drives housing starts in Canada’s largest cities | CMHC). Montreal in particular benefited from pro-rental policies, leading its rental construction to double. While these policies primarily increase supply (covered earlier), their success is a key policy-driven reason behind softening rents.

3. Zoning and Land-Use Reforms: Cities are also loosening zoning to allow more housing units. Toronto adopted citywide multiplex zoning in 2023 (allowing 2–4 units on formerly single-family lots) and is expediting approvals for new apartments. Vancouver approved a broad upzoning in 2023 to permit more low-rise apartments and six-plexes in traditional single-family areas. Calgary (though not one of the “big three” in this question) implemented a blanket rezoning in 2024 for more secondary suites (Fall 2024 Housing Supply Report ) (Fall 2024 Housing Supply Report ). These moves won’t produce units overnight, but they signal a shift toward increasing housing supply long-term. Over time, “this change should allow developers to be more responsive to demand” in previously low-density areas (Fall 2024 Housing Supply Report ) (Fall 2024 Housing Supply Report ). The prospect of greater future supply can also cool rent expectations today – landlords know that the era of chronic undersupply is being addressed, albeit gradually.

4. Other Measures: Provincial governments have introduced rental subsidies and tighter enforcement of rental laws, while cities like Montreal have discussed vacancy taxes similar to Vancouver’s to disincentivize empty units. The federal two-year ban on foreign home purchases (2023-2025) might have indirectly kept more properties in the rental pool rather than being held vacant for speculation. While the immediate impact of these policies on rent levels is subtle, they form part of the broader context that is now more favorable to renters than a few years ago.

Conclusion

In early 2025, Toronto, Vancouver, and Montreal are experiencing a rare cooldown in rents – a welcome relief for renters after a period of unprecedented rent inflation. The evidence points to a classic case of supply and demand rebalancing: a surge in new rental supply, bolstered by returning Airbnb units and policy-driven construction, finally outstripped even the strong demand growth, leading to higher vacancies and forcing landlords to cut or hold rents. Meanwhile, demand growth tempered slightly as some residents left for cheaper regions, remote work reshaped housing choices, and renters pushed back against unaffordable prices. Economic factors – from high interest rates to tenant protections – further constrained landlords’ pricing power, resulting in modest rent declines across these major cities.

For the first time in years, average asking rents fell year-over-year by mid single-digits in Toronto, Vancouver, and Montreal (Asking Rents See First Monthly Increase in Six Months). Toronto’s rents are at a 32-month low, Vancouver’s at a 35-month low (Asking Rents See First Monthly Increase in Six Months). Vacancy rates, while still below ideal healthy levels, are inching upward (Toronto ~2%, Montreal ~2%, Vancouver ~1.6%). Recent statistics illustrate this turning point: for example, Toronto apartment rents down ~7% YoY, Vancouver down ~6%, Montreal ~4% YoY (Asking Rents See First Monthly Increase in Six Months); and as noted, rental stock grew 4.1% nationally in 2024 – the fastest pace since the 1990s (Rental supply gains help cool pace of rent growth in 2024: CMHC – Mortgage Rates & Mortgage Broker News in Canada).

Going forward, the question is whether this is a temporary lull or a sustained trend. Much depends on continued housing construction versus population growth. As of early 2025, however, it’s clear that the market dynamics have shifted. Governments’ push for more housing and regulation of short-term rentals is starting to pay off in moderating rents. For tenants in Canada’s priciest cities, the balance of power has improved: more options are available and landlords can no longer charge record-high prices without question. In summary, rental prices are falling in Toronto, Vancouver, and Montreal due to a confluence of greater supply, slightly softer demand, economic constraints, and proactive policy measures, all converging to finally cool down what had been red-hot rental markets (Asking Rents See First Monthly Increase in Six Months) (Fall 2024 Rental Market Report | CMHC).

Sources: