The rate of empty rental units in the Toronto and Hamilton areas jumped in the first quarter of 2026 to the highest point since the onset of the pandemic, a reflection of cooler market conditions that are forcing landlords to offer more incentives to lure new tenants.
In the Greater Toronto and Hamilton Area, 5.4 per cent of rental apartments were empty, according to a report released Monday by real estate consulting firm Urbanation. The report surveyed purpose-built units that opened to renters in 2000 or later, and did not include recently completed buildings where tenants are in the process of moving in for the first time.
The vacancy rate is now more than double what it was this time two years ago, when it was 2.6 per cent. It is the highest rate since the first quarter of 2021, when 6.3 per cent of units were empty.
More rental apartments are empty because of weaker population growth that is weighing on demand, according to the report. With the inflow of temporary residents dropping and thousands of residents leaving for smaller cities, Toronto’s population is expected to shrink this year, according to a Royal Bank of Canada report published earlier this month.
At the same time, more renters are moving to different apartments in pursuit of lower rent prices, the Urbanation report said. A record high of 8 per cent of rental apartments were either vacant or soon to be vacated.
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But a slowing rental market isn’t deterring developers, the report said. In the past 12 months, developers have broken ground on more than 10,000 units in the GTHA, marking a “multidecade high,” and a record 8,984 units are set to open to tenants in the next 12 months.
To entice renters, about two in three buildings surveyed are offering incentives, according to the report. Nearly half are offering two months of free rent, and offers of cash move-in bonuses are also rising.
“Supply pressures will persist this year as apartment completions run high and population growth slows, creating a window of opportunity for renters to capitalize on improved affordability,” Urbanation president Shaun Hildebrand said in the report.
The cooling rental market in Toronto reflects countrywide trends. Slower population growth and more supply are expected to continue pushing down asking rents this year, according to the RBC report.
But tenants already in place likely won’t feel the relief, as landlords are raising rents, the report said. Additionally, after tenants move out, rent prices are also being bumped up to higher market rates for new renters.
RBC said national vacancy rates should decrease in the future, as it expects population growth to reaccelerate by 2028.
“Though current headwinds will continue pulling vacancies higher in most markets near-term, we don’t see the rental correction extending far out into the future,” the report said.