Rising Rents and Shrinking Vacancy Rates Linked to Growing Homelessness in Canada

A recent study examining housing conditions across Canada has found a strong relationship between rising rents, declining vacancy rates and increasing homelessness, particularly in the lowest-cost segment of the rental market.

While it has long been observed that communities with expensive housing and limited rental availability tend to experience higher levels of homelessness, the new research suggests that worsening conditions in the most affordable part of the rental market may be contributing directly to the problem.

The study examined rental market conditions and homelessness rates across 36 Canadian communities. Researchers found that areas experiencing the largest increases in rents for the least expensive rental units, combined with declining vacancy rates, also tended to experience the greatest increases in homelessness.

Hamilton, Ontario, provides a striking example of the trend. Between 2018 and 2024, the vacancy rate for the city's lowest-cost rental units fell from 2.3% to 1.2%. At the same time, rents in this segment increased by approximately 47%, reaching about $1,200 per month. Over the same period, the median income for a single person in Hamilton increased by only about 18.9%. Homelessness increased by 224% during those six years. The figures illustrate the growing gap between what lower-income households can afford and the cost of even the least expensive rental housing.

The research found that communities where rents for the lowest-cost rental units increased the most generally experienced the largest increases in homelessness.

The relationship was also evident when researchers examined more recent asking rents. An analysis of the 15 most populous Canadian census metropolitan areas found a statistically significant relationship between higher rental prices and higher rates of absolute homelessness.

Some of the communities with the highest average asking rents in late 2024 also recorded relatively high rates of homelessness. Meanwhile, communities with lower average asking rents, including Edmonton and Winnipeg, generally had lower homelessness rates. Vacancy rates showed a similar pattern. As the availability of low-cost rental housing declined, homelessness tended to increase. Communities experiencing the largest reductions in affordable rental availability generally saw the largest increases in homelessness, while areas where vacancy rates improved tended to record smaller increases.

The findings also point to a broader problem within Canada's rental market.

Although average rents in some parts of the country have begun to decline, the lowest-cost portion of the market has continued to become less affordable. This trend is not limited to Canada's most expensive housing markets and has also been observed in communities such as Halifax and Moncton. Researchers used an affordability ratio to measure the relationship between rental costs and household incomes. Of the 36 communities examined, 27 experienced an increase in this ratio. In 24 communities, the average rent for the lowest-cost units had risen to more than twice the level considered reasonably affordable relative to income.

Canada has added substantial rental housing supply in recent years, but the research suggests that much of this new supply has been concentrated toward the higher end of the market. As a result, increased construction has not necessarily relieved pressure on households searching for the cheapest available rental homes. Instead, rents for the lowest-cost units have continued to rise while their availability has declined. For many lower-income Canadians, even the cheapest rental options in their communities are becoming financially out of reach. The result is a widening affordability gap that can leave vulnerable households with fewer options and increase the risk of homelessness.

The findings suggest that increasing overall housing supply may not be enough on its own. Expanding the supply of housing that is genuinely affordable to lower-income households will be critical to reducing pressure at the bottom end of the rental market.

As the supply of affordable units continues to shrink and costs rise faster than incomes, more Canadians could find themselves unable to secure stable housing.