February 21, 2024

Weekly EconMinute—Rental Affordability in Alberta

In this week’s EconMinute, we’re talking about rental affordability in Alberta.

A recent report by the CMHC examined the state of rental markets across Canada. It showed that vacancy rates fell and the cost of rent went up in nearly every major city in the country last year.

Calgary and Edmonton were no exception. In Calgary, rent increased by 14.3% between 2022 and 2023, while Edmonton fared slightly better, posting an increase of 6.4%. Nation-wide, average rents went up by 8.0% last year.

Recent growth in rental costs, combined with falling vacancy rates, has renters understandably concerned and threatens our position as a relatively affordable location. What exactly does this increase mean for renters’ bottom line and for Alberta’s reputation as an affordable province?

Since the average renter makes significantly less money than the average homeowner, we’ll look at the typical income of a renting household when determining rental affordability. Also, since the size of an apartment can affect how much rent people pay, we focus (as does the CMHC report) on the average cost of renting a two-bedroom apartment.

A major limitation to our work is that data on renters’ income is only available up to 2020, but the data for rental costs goes right up until 2023. Although that limits our analysis, we still have enough to form an impression of where we stood a few years ago, and how things are looking (or need to look) right now on rental affordability. Here, we create two income scenarios for renters: first is that renter income in 2023 remains unchanged at 2020 levels; and second, incomes rise in line with rental costs.

Based on our analysis, here’s what we found:

  • Compared to BC and Ontario, Albertan renters’ incomes are higher, their rent is cheaper, and they’ve had smaller rent hikes since 2020.
  • In Alberta, the typical renter paid 25% of their after-tax income towards housing in 2020.
  • Rent has increased, but even if the typical Albertan renter’s income didn’t increase at all from 2020 to 2023, they’d still be paying less than 30% of their income on housing costs.
  • By contrast, if the typical BC or Ontario renter’s income did not rise since 2020, they would both be paying around 40% of their after-tax income to housing.
  • In BC, 33% of the typical renter’s income went towards housing in 2020. Today, they would have to earn $13,000 more per year just to keep up with their 2020 levels.
  • In Ontario, middle-of-the-road renters also paid 33% of their income towards housing. Now, they’d have to earn over $10,000 more per year to stay at their 2020 levels.

While no one is happy to see their rent go up, average rent in Alberta today is about the same as it was in BC and Ontario four years ago, and the typical Alberta renter makes more money than their counterparts in those provinces. It’s not all rosy though. To maintain their 2020 level of a 25% rent-to-income ratio for an average 2-bedroom apartment, the typical Albertan renter would have to now earn $10,000 more per year. Furthermore, as difficult as this is for the typical renter, it is especially difficult for those who earn less, who are more at risk of being pushed out of the market and into homelessness.

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