Residential landlords in the largest cities of the United States are commanding rents well above the average rates in Canada’s major urban centres. Apartment Guide, a U.S. based rental property listing service, cites a national average price of USD $1,354 (CAD $1,800) for available two-bedroom units in 2018.
Canada Mortgage and Housing Corporation’s (CMHC) annual rental market report reflects average rents for all supply within surveyed markets and can’t be directly compared to Apartment Guide’s scoped snapshot of the rates asked for new leases. Nevertheless, significant price gaps in the two datasets suggest Canadians might suffer rent sticker shock searching for accommodations in American cities that tend to draw the most cross-border migrants. On the plus side, there should be more options available given that the national vacancy rate hovers around 7 per cent in the U.S., well above the 2.4 per cent national vacancy rate recorded in Canada last fall.
Variance in currency values complicates cross-border rent comparisons since using one country’s dollar as the yardstick appears to skew values up or down in the other country. However, any measure of housing cost impact should be tied to the incomes tenants actually earn in their own countries, not their neighbours’ theoretical purchasing power.
Regardless of the exchange rate, CMHC’s 2018 national average rent for two-bedroom purpose-built rental apartments — CAD $1,059 or USD $794 — trails the Apartment Guide average for the U.S. The Canada-wide average for rental stock within private condominium buildings — CAD $1,515 or USD $1,136 — is more open to interpretation. When viewed in U.S. funds, it’s lower than average rates for available two-bedroom units in the 15 most populous U.S. cities.
With the exception of New York, which boasts more than 8.6 million inhabitants, Canada’s five largest urban centres are roughly the same size as their American counterparts. The 2016 Census counted a collective population of about 15 million in Toronto, Montreal, Vancouver, Calgary and Ottawa/Gatineau, ranging from nearly 6 million residents in the Greater Toronto Area to 1.3 million in Ottawa/Gatineau. Yet, asking rents in the five largest American cities of New York, Los Angeles, Chicago, Houston and Phoenix appear moderately to dramatically steeper than Canadian tenants typically pay. So, too, are rents in San Francisco, Boston, Seattle and Washington, DC.
CMHC reports a 19 per cent turnover rate in purpose-built rental units Canada-wide last year, meaning that a relatively small portion of newly negotiated leases are reflected in the national 3.4 per cent increase in average rent. In contrast, Apartment Guide’s figures are only for new leases so rising rents are not surprising. Even so, rents for two-bedroom units actually dropped in 29 per cent of the surveyed U.S. cities, while increasing in every major market CMHC monitors.
CMHC also reports that more than 40,000 new purpose-built rental units were added to Canadian housing supply between July 2017 to June 2018. On a per capita basis, that outpaces the 287,000 units that came onto the U.S. market last year. Meanwhile, demand continues to surge in Canada’s largest cities — attributed to immigration, employment growth and seniors moving from home ownership to rental accommodations.
Big city trends and anomalies
Based on CMHC’s two-bedroom benchmark, rented condo units in Toronto and Vancouver garner the highest rates in Canada — an average of USD $1,795 (CAD $2,393) in Toronto and USD $1,525 (CAD $2,034) in Vancouver. That would be a bargain in the top-three American cities, where the 2018 average listed price for two-bedroom units was: USD $6,078 (CAD $8,083) in New York; USD $4,054 (CAD $5,390) in L.A.; and USD $2,795 (CAD $3,717) in Chicago.
Phoenix, with a population of 1.6 million, is the low-rent standout in the U.S. top five. Apartment Guide pegs the average asking rent for two-bedroom units at USD 1,209 (CAD $1,608) last year. Meanwhile, the average asking rate for two-bedroom units in Houston, at USD $1,616 (CAD $2,149), stands out for trending downward — dropping 8.4 per cent from the previous year.
Canada’s most affordable big city is arguably much more of an anomaly. Montreal has about two million fewer residents than Toronto and nearly 1.5 million more than Vancouver, but tenants in purpose-built rental buildings pay an average of 45 per cent less for two-bedroom units than renters in Toronto and nearly 51 per cent less than renters in Vancouver.
CMHC pegs the average rent for a two-bedroom unit in a purpose-built rental building in Montreal at CAD $809 (USD $606.75) or nearly 24 per cent lower than the national average. Average rent for two-bedroom condo rental units is a still-competitive CAD $1,208 (USD $906) or 20 per cent lower than the national average for this pricier stock.
More plus-$3,000 than sub-$900 markets
Landlords in Toledo, Ohio, had the lowest expectations in the 100 American cities Apartment Guide surveys. However, the average asking rate of USD $823 (CAD $1,094) for two-bedroom units was also nearly 16 per cent high than in 2017.
Average rents for available two-bedroom units dipped under USD $900 (CAD $1,197) in only six cities: Tucson, Arizona; Tulsa, Oklahoma; Greensboro, North Carolina; Lubbock and El Paso, Texas. They surpassed USD $3,000 (CAD $3,990) in nine cities: New York; Jersey City; Boston; Seattle; Washington, DC; and Los Angeles, San Francisco, Oakland and San Jose, California.
Among the 100 most populous U.S. cities, the sharpest spike in two-bedroom rents was the 25.3 per cent increase in Plano, Texas, (population: 287,000), taking the average rent up to USD $1,808 (CAD $2,404). Three cities in Arizona — Chandler, Scottsdale and Glendale — saw asking rents jump by 10.8 to 15.2 per cent. Double-digit increases also occurred in: Los Angeles; San Diego; Atlanta; Oakland; Cleveland; Riverside, California; Anchorage; Newark; Orlando; Toledo; Norfolk; Boise; and Des Moines.
Average asking rents for two-bedroom units plummeted most dramatically in New Orleans, falling nearly 18 per cent to USD $1,968 (CAD $2,617). Declines of more than 5 per cent were registered in: Houston; Fort Worth; Detroit; Nashville; Virginia Beach; Stockton, California; and Laredo, Texas.