The vacancy rate for purpose built rentals in Waterloo region's three cities reached its highest level since 1993, according to the latest rental market report report from the Canada Mortgage and Housing Corporation.
The CMHC says vacancies for purpose built rentals reached 3.6 per as a result of supply growth outpacing demand due to a drop in the number of international students.
The fall 2024 report attributes higher vacancies in Kitchener East and Waterloo specifically to the federal government's cap on international study permits, which reduced student rental demand last fall.
The CMHC report says the region's role as an educational hub has placed significant pressure on its rental market.
"Slower rent growth signaled market shift while affordability concerns remained," the report says.
The average annual rent increase for 2-bedroom units in the region slowed to 4.2 per cent from 7.4 per cent in 2023, bottoming out at $1,766 per month.
Lower turnover meant fewer opportunities to raise rents to market rates, the report says.
In addition, a strong expansion in rental supply, especially in all three cities contributed to the slower pace of rent growth.
The growth in rental supply eased some vacancy pressures, especially for more expensive units. However, affordability for lower-income renters remained a challenge with rents for newer 2-bedroom rental units averaging $2,356.
The vacancy rate was below 1 per cent for units deemed affordable, which is rent at or below 30 per cent of income.
Condominium apartment vacancy rates in the region continued to be much lower than in the purpose-built rental market due, in part, to condominium apartment owners prioritizing quicker rental turnover, contributing to lower vacancy rates, the report says.
"These owners were more willing to make concessions to rent their units than landlords in the purpose-built market, as they had less capacity for financial losses."
