Unaffordability crisis? What a new report says about Waterloo Region’s rental market

A new report confirms what many already know – Waterloo Region’s rental market is unaffordable to lower-income earners.

The Canada Mortgage and Housing Corporation’s rental market report was released Wednesday.

In it, the agency takes a look at cities across Canada and the broader nationwide picture in 2023.

Rental and vacancy rates

CMHC’s report found that the vacancy rate for purpose-built rentals in Kitchener-Cambridge-Waterloo was 2.1 per cent, up from 1.2 per cent from 2022.

CMHC says the increase is partly due to new housing supply added in the region, and in particular, Kitchener’s west end. The vacancy rate in that area increased from 1.3 per cent in 2022 to 3 per cent in 2023.

The average rent for a two-bedroom apartment rose 7.4 per cent to $1,658.

As for condominiums, the vacancy rate was 0.1 per cent. No data was released on the average cost to rent a two-bedroom condo unit.

The report suggests that renters are willing to pay higher rents for condo units.

Putting pressure on the rental market

Rising interest rates and high home prices are still having an impact on the rental market. The report said, as a result, some renters aren’t making the move to home ownership.

That, in turn, is putting pressure on the local rental supply.

Who’s renting?

The CMHC report found that the rental market is shifting towards older adults and those with higher-incomes.

Households in Kitchener-Cambridge-Waterloo earning $100,000 or more per year jumped from 36 per cent in 2016 to 45 per cent in 2021. While rental rates in the region might be expected to decrease as incomes increase, the opposite is happening locally. Citing data from Statistics Canada, the report said the amount of people renting their primary residence rose from 32 per cent in 2016 to 35 per cent in 2021.

That trend was also illustrated in a CMHC graph, which indicated an increase in renters across all age categories, but especially for those between the ages of 25-34 and 35-44.

Rental supply rising

The supply of new rental apartments in Kitchener-Cambridge-Waterloo was moving at a “robust pace” in 2023, according to the CMHC report.

1,481 new rental apartments were completed during the 12-month period ending June 30, 2023.

The report called it “one of the largest yearly gains on record.”

Condominium market

The number of new condo apartments, meanwhile, was 1,236.

The report found that 72 per cent of those were added in the area of Kitchener West and 27 per cent were in Waterloo.

Of the total number of new condo apartments, 33.1 per cent were rented out to others.

The report said more condo owners are choosing to rent their units because of rising interest rates.

Higher rents

Renters won’t be surprised to hear that available units are more expensive.

The CMHC report said newly-added apartments in Kitchener-Cambridge-Waterloo were being rented for an average of $2,100. But interest in these units was also high, with only a 0.5 per cent vacancy rate.

Rent growth in the region increased 8.9 per cent, from 7.3 per cent in 2022.

The CMHC suggests new, higher-priced units will free up lower-priced apartments and improve affordability and ease demand for existing housing over time.

Unaffordable apartments

The report stated an affordable home is “one where the renter household is spending less than 30 per cent of its before-tax income on rent.”

Using that calculation, those earning less than $49,000 per year would have to pay at least $381 more every month, on top of that 30 per cent, to afford a two-bedroom apartment.

The trouble with that, the report explains, is that they would face fierce competition from higher-income earners on the few places available to rent.