Finding an affordable apartment to rent in most of Canada’s larger cities is nearly impossible for people earning minimum wage, a new report from the Canadian Centre for Policy Alternatives (CCPA) says.

Only 22 neighbourhoods out of nearly 800 in larger Canadian cities have average rents for two-bedroom apartments that would be affordable for someone earning minimum wage, the report says. The situation has grown worse since the CCPA’s first study of the issue in 2019.

“Data for cities and city regions across Canada show that among 62 urban areas, minimum-wage workers can afford a one-bedroom apartment in only nine of them and a two-bedroom apartment in only three,” the report said. “Affordable rentals are available only in Brandon [Man.], in Cape Breton [N.S.], and in seven smaller Quebec cities.”

There is significant variation across the country, but in most cities, minimum wage workers need to work more hours to pay their rent than they did in 2019, leaving less money for other needs.

“Tenants in Vancouver, Toronto, Victoria, Kelowna, Ottawa, Calgary, and Hamilton cannot afford a two-bedroom unit even with the combined income of two full-time minimum-wage workers,” the report said.

The CCPA report uses the Canadian Mortgage and Housing Corporation’s (CMHC) data on average rents down to a neighbourhood level across Canada. It frames the research around a “rental wage,” the hourly rate required to afford an average unit based upon the CMHC’s affordability benchmark, which holds that housing is affordable when it “costs less than 30 per cent of before-tax household income.”

Average rent means theoretically, there are units available for both lower and higher rates. But CCPA senior economist David Macdonald, in an email to Finance Canada, says the report sought to look at a neighbourhood level to expose “the lower end of the range.” As an example, he notes the cheapest neighbourhood in Toronto, Kennedy Park, where the rental wage was $25 per hour.

“Minimum wage was $16.55 per hour in the same period,” he wrote. “So is there an apartment that's a third below the average in that particular area? I mean, maybe, but you'll have a heck of a time finding it even if it's vacant, which it certainly isn't.”

The gap between the rental wage and the minimum wage has grown since the CCPA’s 2019 report. For a one-bedroom apartment, the gap is smallest in Newfoundland and Labrador at $1.79, and largest in B.C. at $13.21. For a two-bedroom apartment, Quebec’s gap is smallest at $4.79, while in B.C. and Ontario, rental wage is double the provincial minimum wage.

The only cities in Canada where the one-bedroom rental wage is lower than minimum wage are Brandon, Man., Cape Breton, N.S., and the Quebec cities of Drummondville, Granby, Rimouski, Saguenay, Shawinigan, Sherbrooke and Trois-Rivières. For a two-bedroom apartment, the rental wage is below minimum wage only in Saguenay, Shawinigan and Trois-Riviéres.

Population growth and a slow pace of new construction amid high borrowing rates have helped drive rents up across Canada. The national average asking rent for a one-bedroom apartment rose over 30 per cent from a pandemic-era low of $1,414 (in April 2021) to $1,849 in June of this year, according to Rentals.ca data.

In a mid-September note, Desjardins Group economist Marc Desormeaux wrote that rent has been an "outsized" factor in Canadian inflation figures, and as such, "rent prices are both a reason for the skyrocketing cost of living and the subject of monetary policy discussions."

Most recently though, rent increases have been slowing, with August 2024 average rents up 3.3 per cent from August 2023, a pace closer to the long-term average. Desormeaux writes that increases will likely remain slower, but that "structural factors look likely to prevent a more significant improvement."

The CCPA argues that “modern rent controls” would help the situation, and that provincial governments could create more tangible policy to prevent “abusive rent increases.” The Canadian Federation of Apartment Associations (CFAA), alternatively, contends that the main issue is one of supply, with inflation recently hindering new builds and also driving up landlords’ costs. Various government taxes and fees on new developments frequently make up more than 30 per cent of their cost, driving the breakeven point higher, CFAA interim president Tony Irwin told Finance Canada.

"We need 3.5 million housing units across Canada, and, you know, 30 per cent of Canadians rent," he said. "So you can do the math on how many rentals we would need."

John MacFarlane is a senior reporter at Finance Canada. Follow him on Twitter @jmacf.

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