Rental Vacancy Rate

See SDG11 – Sustainable Cities and Communities

Status: moving backwards

Definition

Percentage of rental homes that are vacant.

A low rental vacancy (below 3%) indicates a shortage of rental properties. This tends to drive rent rates up as demand outpaces supply. A high rental vacancy indicates that a neighbourhood or a city is not attractive and that could spiraled down into economic depression.

This is not a linear indicator. The goal is not to increase or decrease the rate as much as possible. A healthy rental vacancy is a balancing act to keep the economy thriving while providing affordable options for the whole community.

Vision

London has an optimal rental vacancy rate (between 3% and 4%).

Discussion

An article published in the beginning of 2020 by Jonathan Juha states thatE5:

Strong population growth and a hot real estate market combined to push London’s vacancy rate in 2019 to its lowest level in nearly two decades.

London Free Press

Data is from the Canada Mortgage and Housing Corp. (CMHC). Their report released in 2020E2 shows the downward trend in London CMA:

This is not an isolated phenomenon in Lonton Ontario. According to the CMHCE3:

… 2019 Rental Market Survey indicates that the average national vacancy rate has declined for the third year in a row. 

Canada’s Rental Vacancy Rate Declines
Reference YearLondonHamiltonGuelphSt.Catharines-Niagara
20152.73.41.22.7
201623.80.92
20171.62.31.21.3
201823.11.42.2
20191.73.91.92.1
Rental Vacancy Rate in SW Ontario – StatCan

Besides the usual factors of the real estate market, short-term rentals is gaining more attention. According to a 2020 studyE1, Airbnb reduces rental vacancy and increases price of rent:

… while the total supply of housing is not affected by the entry of Airbnb, Airbnb listings increase the supply of short-term rental units and decrease the supply of long-term rental units.

The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb

An article in the Harvard Business Review gives the following recommendation to policy makers seeking to minimize the negative impacts of models like AirbnbE4:

On the one hand, these platforms allow homeowners to make money when they have more room than they need. On the other hand, absentee landlords are reducing the housing supply, which, in turn, increases the cost of living for local renters. According to our results, one way to reduce the latter effect while retaining the benefits of home-sharing would be to limit how many homes can be added to the short-term rental market, while still allowing owner-occupiers to share their extra space.

Connections

Related indicators

  • Price of Rent

Local Story

produced by the London Community Foundation

Local Initiatives

  1. Homes Unlimited: https://homesunlimitedinc.ca/
  2. Indwell: https://indwell.ca/
  3. London Homeless Coalition: https://londonhomeless.ca/

Supporting Evidence

  1. Barron, Kyle and Kung, Edward and Proserpio, Davide, The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb (March 4, 2020). Available at SSRN: https://ssrn.com/abstract=3006832 or http://dx.doi.org/10.2139/ssrn.3006832
  2. Canada Mortgage and Housing Corporation (CMHC). Rental Market Report 2020 – London CMA: https://assets.cmhc-schl.gc.ca/sites/cmhc/data-research/publications-reports/rental-market-reports/2019/rental-market-reports-london-64403-2020-a01-en.pdf?rev=a1116b40-c03f-4dbb-bc69-b65910a6811e
  3. Canada Mortgage and Housing Corporation (CMHC). Canada’s Rental Vacancy Rate Declines: https://www.cmhc-schl.gc.ca/en/housing-observer-online/2020-housing-observer/canadas-rental-vacancy-rate-declines
  4. Harvard Business Review. Research: When Airbnb Listings in a City Increase, So Do Rent Prices: https://hbr.org/2019/04/research-when-airbnb-listings-in-a-city-increase-so-do-rent-prices
  5. London Free Press. London apartment vacancy rate drops to lowest level in nearly 20 years: https://lfpress.com/news/local-news/london-apartment-vacancy-rate-drops-to-lowest-level-in-nearly-20-years

Data Tables

  1. StatCan. Canada Mortgage and Housing Corporation, vacancy rates, apartment structures of six units and over, privately initiated in census metropolitan areas: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3410012701