Josh thought he had cracked the code to homeownership after he bought a three-bedroom house with a basement unit in Toronto five years ago.
Eager to not move again, the tech manager, who asked not to be named to protect his privacy, went beyond his budget and took on a larger mortgage to purchase a $1.3-million property with his wife, with the plan being to rent out the basement to help pay it off.
The move seemed to work well initially. His real estate agent got him his first tenant, who stayed for two years before moving out in 2023. Josh was then overwhelmed with “tons and tons” of responses when he relisted the unit.
“I could raise the rent a lot,” he said. “I think about 30 per cent.”
But by the time his second tenant moved out in mid-2025, Josh began to see a different reality in the
rental market
. Very few people responded to his advertisement and most of the applications weren’t ideal, he said, since many didn’t have a stable job and others wanted to live with four or five roommates.
Eventually, he had to reduce the rent to $1,765 from $1,925 before finally getting a couple to move in at year-end.
“I am relieved, but it was a huge change,” he said. “It was a big amount of stress that was added to the lives of my wife and I. We were really worried.”
Josh said he believes the key reason behind the change was the decline in Canada’s
immigration
growth rates.
Canada’s
population
grew at a record pace between 2021 and 2023 by roughly one million people each year. The federal government at the time made it easier for foreign workers and international students to enter the country right after the pandemic since there were hundreds of thousands of job vacancies.
But the sharp increase in the number of people also played a role in worsening the
housing crisis
, which led to multiple offers for rental units such as the one Josh was offering in 2023.
That all changed in 2024 when the federal government decided to limit the number of foreign students and workers coming in, followed by subsequent decreases in the annual immigration targets.
Those policies and a few more taken by the government led to a decline in the population growth rate for the first time ever in 2025 — a decrease of 0.2 per cent or about 102,000 people, according to Statistics Canada.
As a result, asking
rents
— the rent landlords advertise — have declined by about $200 per month since peaking in early 2024, according to Giacomo Ladas, an associate director at Rentals.ca, but this is still $300 to $400 higher on average than pre-pandemic levels.
Prior to the pandemic, rents increased by a couple of percentage points each year, but he said that trend got “thrown out of the window” starting in February 2021. Between 2021 and until the peak of 2024, asking rents in Canada increased by about $500 a month.
Many landlords are now also providing incentives such as one or two months of free rent to attract tenants.
Ladas said the sharp swings in the population growth rate in recent years played a key role in impacting asking rents, but it wasn’t the only factor since there has also been a new wave of condos and other homes that have hit the market.
Some of these units were built by developers with the aim of being sold rather than rented, but they haven’t found buyers due to the lack of demand. He said many units are now being listed for rent because developers are trying to recover some of their money.
Ladas said the poor state of the economy is another reason why young Canadians are preferring to stay at home longer instead of entering the rental market.
The vacancy rate for condo units in the Greater Toronto Area (GTA), as of October 2025, rose to 0.9 per cent from 0.7 per cent, but that’s still quite low, Jordan Nanowski, lead economist for the GTA housing market at Canada Mortgage and Housing Corp. (CMHC), said.
He said the slower-than-expected increase was because a lot of condo owners are individual investors who don’t want to put up with a couple of months without rent, which is easier for a large purpose-build rental operator to endure, so they are more willing to make concessions and accept lower rents.
Those feeling the most pressure tend to be buyers who entered the market at its peak between 2021 and 2023, Gus Papaioannou of Realosophy Realty Inc. said.
“Someone buying then was thinking, ‘Well, rates are one per cent, yes, I’m buying high, but this person’s paying me an exorbitant amount of money to rent my basement. It’s fine,’” he said. “Nobody thought, ‘Oh my god, rates will go up this way and, by the way, the renter is now going to pay less because rents have dropped 20 per cent.’”
The situation has “exacerbated” in the past year amidst a stalling economy, Papaioannou said. Some of his clients didn’t want to carry the burden of covering the $700 to $1,000 per month their renters were paying, so they decided to sell, although others with deeper pockets are willing to “hang on for a couple of years.”
Holding on could still pay off. Nanowski said the current market softness is temporary and is “guaranteed” to reverse within a few years.
“There’s just so much rental supply coming online right now, but, eventually, there will be a reversal, sometime like 2027, 2028 onwards, when this gets worked through because there just won’t be new condo units being built,” he said.
Regardless of when the potential reversal in the rental market takes place, homeowners such as Josh are likely to remain cautious.
“Back then, everyone was thinking, ‘Oh my god, this is easy money, free money,’” he said. “Now, they are making noise and saying, ‘Is this really worth it?’”
• Email: nkarim@postmedia.com