Case Study: Why Rent Prices Are So High in Canada — and How to Fix It
Executive Summary
Canada is experiencing unprecedented rent increases across major and mid-sized cities. In
In 2025, average rents for one-bedroom units in Toronto and Vancouver are above
$2,600/month, while Calgary and Edmonton have seen year-over-year jumps of 10–15%.
This affordability crisis is more than a housing issue: it directly impacts talent mobility,
entrepreneurship, consumer spending, and the competitiveness of Canadian businesses. For
leaders, solving the rental challenge is a matter of economic strategy as much as social
policy.
The Current Reality
• Demand pressure: Record immigration and inter-provincial migration fuel rental demand
faster than supply.
• Supply lag: Long zoning approvals, restrictive land use, and construction bottlenecks limit
new housing delivery.
• Cost inflation: Rising interest rates, labour shortages, and material costs push up
development expenses.
• Market dynamics: Institutional investors and short-term rentals tighten available stock.
Why This Matters for Business
1. Workforce Retention: High rent burdens reduce employee satisfaction and push talent to
more affordable regions.
2. Entrepreneurship Risk: Rising living costs limit the ability of individuals to launch and scale
businesses.
3. Consumer Spending Constraints: With households spending up to 50% of income on rent,
discretionary spending contracts — hitting local service industries hardest.
4. Regional Competitiveness: Economic hubs like Toronto, Vancouver, and Calgary risk
losing momentum if workers can’t afford to live near opportunities.
Root Causes
• Population–supply mismatch: Population grew by 1 million+ in 2024, while housing starts
remain below long-term needs.
• Policy friction: Outdated zoning rules and “Not in My Backyard” (NIMBY) resistance limit
density.
• Development costs: Rising land, labour, and borrowing expenses discourage new projects.
• Market imbalance: Growing presence of investors reduces the stock of affordable, long-term
rentals.
Solutions: How to Fix It
1. Accelerate Supply
• Streamline municipal approvals for multi-family housing.
• Incentivize purpose-built rental developments with tax breaks and reduced fees.
2. Business-Led Partnerships
• Employers co-investing in workforce housing.
• Industry associations collaborating with municipalities to pilot mixed-income housing models.
3. Policy Innovation
• Federal and provincial housing accelerators to align permits, funding, and infrastructure.
• Expand rent subsidies and housing vouchers for vulnerable groups.
4. Regional Diversification
• Encourage business and talent relocation to mid-sized Canadian cities.
• Invest in infrastructure to support distributed economic growth.
5. Embracing Innovation
• Modular and prefabricated housing to reduce costs and timelines.
• Data-driven planning tools to anticipate demand and guide smart growth.Lessons for Business Leaders
• Factor housing into strategy: When planning workforce growth, include rental affordability as
a key retention metric.
• Explore location strategy: Consider regional offices or remote-friendly models to tap into
talent in more affordable cities.
• Engage policymakers: Businesses can play a critical role in advocating for zoning reform
and infrastructure investment.
Conclusion
The rent crisis is not just a housing challenge — it is a competitiveness issue for Canadian
business. Without decisive action, rising rents will erode talent pipelines, dampen consumer
demand, and slow entrepreneurship. But with bold policy reform, public-private collaboration,
and innovation, Canada can close the supply gap and stabilize affordability.
At Sapienta Consulting, we help organizations anticipate these systemic risks and design
growth strategies that align business objectives with the evolving realities of Canada’s
economic environment.
