Rising home prices, limited housing supply, and financial barriers are forcing many would-be Canadian homeowners to remain in the rental market, according to a new report from RE/MAX Canada.

The Nation of Renters Report highlights affordability challenges, a critical housing shortage, and shifting perspectives on renting versus owning as key factors driving the trend.

The findings have implications for multi-family rental projects and future condominium developments. Many developers have already switched planned condo projects to rentals. Meanwhile, a number of condo projects are grappling with financial pressures and resulting legal action.

Homeownership Out of Reach for Many

With home prices doubling in most markets between 2006 and 2021, downpayments and mortgage-qualification rules have become major roadblocks.

“Affordability remains, by far, the greatest barrier to home ownership from coast to coast,” said Christopher Alexander, president of RE/MAX Canada. “With the average price of a home in most Canadian markets more than doubling between 2006 and 2021, first-time buyers are falling through the cracks.

“Rental rates that remain above historic levels, the high cost of living, and wages that have not kept pace with price growth pose a serious challenge to buyers hoping to amass a downpayment. It’s near impossible for some buyers, even with steady, well-paying jobs. The dream of home ownership is eroding further and faster than their ability to save.”

Further complicating the situation is the impact of U.S. President’s proposed new U.S. tariffs, which have created economic uncertainty, especially in Ontario and Quebec.

Housing Supply Shortages Driving Prices Up

The lack of affordable housing supply is another major factor pushing Canadians into rentals. According to the report, construction of affordable housing has lagged significantly, with only 45,000 federally assisted units built between 1995 and 2019—matching the number built in a single year back in 1971.

“Builders and developers are eager to get shovels in the ground, but projects need to be financially viable to proceed,” the report states.

High land costs, zoning restrictions, lengthy approval processes, and high development fees have all constrained new construction. At the same time, there is a mismatch between what is being built and what buyers need.

“Smaller units are overwhelming the market when more spacious missing-middle product is desperately needed to support urban family living,” states the report.

(Missing-middle product refers to homes within middle-income earners’ financial capabilities.)

Government intervention will be necessary to revise housing policies and increase supply, says RE/MAX.

“Policy shifts and zoning reforms will be necessary to support density and intensification goals,” the report states.

Buy or Rent?

With rising housing costs, many Canadians are finding that renting is nearly as expensive as owning, making the decision to purchase even more difficult. Citing Ratehub.ca date, RE/MAX says the cost of carrying a $600,000 home in the Greater Toronto Area, with a 10% downpayment and a five-year fixed mortgage at 4.1%, is approximately $2,665 per month—only slightly more than the average rent for a one-bedroom apartment in Toronto.

“Those hoping to enter the housing market for the first time have been caught in the middle, unable to afford to buy, as they continue to rent at rates that are on par with mortgage carrying costs in many cities,” the report states.

Rental demand has surged in recent years due to affordability challenges and rising home prices, driving rental rates higher and leaving even fewer options for those seeking housing.

While some relief has been observed in rental markets, with average rental prices moderating in late 2024, rates remain historically high. Vancouver leads as the most expensive rental market in Canada, with an average one-bedroom unit priced at $2,512 per month, followed by Toronto at $2,360, Halifax at $2,030, Ottawa at $2,012, Hamilton at $1,723, and Calgary at $1,606.

The report also questions whether certain government regulations, such as the Office of the Superintendent of Financial Institutions (OSFI) stress test, have become more of a hindrance than a safeguard.

“The OSFI stress test has outlived its usefulness and is unnecessarily inhibiting capable, entry-level purchasers,” said Alexander.

With homeownership rates declining and affordability challenges persisting, RE/MAX is calling for policy changes to help more Canadians buy homes.

“We need policies and incentives that support home ownership as a feasible reality for Canadians, not a distant or improbable dream,” said Alexander. “The housing crisis is already a chronic issue. The longer it takes to respond, the greater chance for home ownership to slide further out of reach.”