Housing: Montreal increasingly unaffordable, despite a lull

Tenants are paying more and more for rent in the Montreal region, according to a report by Canada Mortgage and Housing Corporation (CMHC).

Average rents for a two-bedroom apartment rose by 7.7 per cent in the metropolitan area in the first quarter compared with last year, according to the federal agency’s update published Tuesday.

This follows an 11.7 per cent increase in the same period last year.

Finding a four-and-a-half for under $1,500 in Montreal is no easy task. The market is very tight, with a vacancy rate of around 1 per cent.

Demand is still very strong, and there aren’t many new units arriving in these price ranges,” explained Francis Cortellino, CMHC’s specialist in housing market analysis for Quebec, in an interview. So, the market is still pretty tight.”

The search is easier for those looking for more upscale housing, at over $2,000, where the vacancy rate is around 5 per cent. “It’s really a tale of two markets,” said the economist, “(…) There’s a lot of competition.”

CMHC hasn’t determined a threshold where the rental market would be at equilibrium, but Cortellino points out that vacancy rates were between 3 per cent and 4 per cent in Montreal from 2006 to 2016, and rents were keeping pace with inflation.

With the recent surge in housing costs, affordability is deteriorating in and around Montreal. In the first quarter, rent accounted for 13.3% of the average income of a two-person household in Montreal. The cost of rent has increased since 2020, when it stood at 10.9%.

The indicator does not represent the situation of all households, Cortellino readily acknowledged. “It’s not all tenants who live with two people. Not all tenants earn the average wage.”

It should be noted that rent increases are higher than the Housing Administrative Tribunal’s (TAL) adjustment rate, as landlords take advantage of tenants leaving to adjust rent prices in line with the market.

Hope for a lull

The rental market is likely to moderate in the coming months, however, as new housing construction progresses, Cortellino argued. “There are 23,000 rental apartments under construction in the Montreal area, and that’s a near-record level.”

At the same time, a drop in immigration and a tougher job market for young adults will temper demand. The specialist expects CMHC’s next annual report on the rental market, due this fall, to “possibly confirm” an increase in the vacancy rate.

In another sign of calm, posted rents – the vacant units available on the market – rose less rapidly in Montreal, while they fell in several major Canadian cities, including Calgary, Toronto, Vancouver and Halifax.

In Montreal, posted rents rose by an average of 2 per cent, compared to an increase of 8.4 per cent over the same period last year.

In Toronto, more investors had difficulty finding takers for their condos and decided to offer them for rent, explained Cortellino. “That brings a lot of pressure on rents, a lot of competition in Toronto. In the case of Montreal, that market is much smaller.”

–This report by La Presse Canadienne was translated by CityNews