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Renting vs. Buying: Is Renting More Affordable?

Looking for a new place to call home, but not ready to buy in today’s high-cost real estate market? You’re not alone. For many Canadians, rental homes, with their lower upfront costs, continue to be a practical, flexible alternative to purchasing a home.

But the skyrocketing costs of Canada’s housing market hasn’t left the Canadian rental market unscathed. So how can you secure a great rental in this more challenging market? In this article we'll explore the affordability of rentals across Canada, take a closer look at renting versus buying, and guide you through the ins and outs of the home rental process.

How affordable are long-term home rentals in Canada?

The high costs of buying a home in Canada has pushed many people out of the real estate market. The result? A higher demand for rentals, which in turn has pushed up rental prices—making the process of finding the ideal rental home more challenging.

This means the rent vs. buy decision may be more difficult — if you can afford the down payment for a home. That's a big "if", though: With home prices going for a national average of $703,446—and the picture looking even bleaker in Vancouver ($1,205,800) and Toronto ($1,128,100)1—getting that down payment together isn't an easy task for many consumers.

The Canadian Rental Market in Numbers

If you're looking to rent a home in Canada, you'll want to explore all available rental options—and be prepared to act quickly when you see the home you want.

A peek at the numbers tells us why: According to the CMHC’s 2024 Rental Market Report,2 the national vacancy rate in 2023 dropped to 1.5% for apartments in rental buildings (that is, buildings constructed exclusively for long-term rental purposes), and the average rent for a two-bedroom unit climbed 8% to $1,359. Meanwhile, condominium rentals, which are individual condo units rented out by their owners, saw an even lower national vacancy rate of 0.9% while also commanding higher rents, with a two-bedroom unit averaging $2,049.3 (This higher rent reflects the upscale amenities and locations typically offered by condo rentals.)

These are just the national rates and averages. Here's a snapshot of vacancy rates and average rents in three major Canadian cities:

 

City

Apartment rentals

Condominium rentals

Vancouver, BC

Vacancy rate: 0.9%

 

Average ren (two-bedroom unit): $2,181

Vacancy rate: 0.9%

 

Average rent (two-bedroom unit): $2,580

Toronto, ON

Vacancy rate: 1.5%

 

Average rent (two-bedroom unit): $1,940

Vacancy rate: 0.7%

 

Average rent (two-bedroom unit): $2,862

Montréal, QC

Vacancy rate: 1.5%

 

Average rent (two-bedroom unit): $1,096

Vacancy rate: 1.3%

 

Average rent (two-bedroom unit): $1,642

Source: 2024 Rental Market Report, CMHC

Affordability of the Canadian Rental Market

These numbers highlight the challenge of finding a rental home you both like and can afford. The bottom line? You may not be able to have both. But staying informed and being prepared can go a long way to helping you find a rental home that meets most of your requirements.

Renting vs. Buying a Home in Canada

Are you thinking about making the jump to home ownership? Choosing between renting and buying a home is a major decision that affects both your finances and your lifestyle. The following comparison table shows the pros and cons of each option:

 

 

Renting

Buying

Upfront Costs

Lower upfront costs (first month's rent, rent/security/key deposit)

Higher upfront costs (down payment, closing costs)

Monthly costs

Generally lower, with rent being the primary expense

Mortgage payments, property taxes, maintenance fees or costs, insurance (home and mortgage)

Maintenance

Landlord responsible for repairs and upkeep

Homeowner responsible for repairs and maintenance/maintenance fees

Flexibility

Easy to move, (leases are short commitments compared to mortgages)

Long-term stability in one location

Equity

No equity building

Builds equity over time

Market risk

Not affected by property value fluctuations

Subject to property market fluctuations

Control

Limited ability to make changes to property

Full control: Can modify or renovate any part of the property

Financial commitment

Short-term commitment

Long-term commitment

Stability

Less stable; potential for non-renewal of lease

Stable, long-term residence

Investment potential

None; rent payments don't contribute to ownership

Can benefit from property value appreciation

 

Let’s illustrate the different pros and cons with an example: Imagine you’re deciding between renting a charming two-bedroom condo or buying a similar unit in the same vibrant neighbourhood. How does renting compare to buying?

 

Renting

The monthly rent for the condo can be more manageable than a mortgage payment, and as for maintenance and repairs? Not your concern—the landlord handles these details. And with a rental, you'll have more flexibility if you’re unsure about committing to one location long-term, or if you value the ability to easily move (to pursue other job opportunities, for example). But the downside to renting means you won’t build equity, and your rent could increase over time.‌ 

 

Buying

What if you decide to buy the other condo instead? You'll get long-term stability and the opportunity to build equity. You may even potentially benefit from an appreciation in property values. But you’re also taking on several significant responsibilities, including mortgage payments, property taxes, and condo maintenance fees. And the initial upfront costs, such as your down payment and closing costs, can be quite steep.‌

 

Rent-to-own

Another option that may be available? Rent-to-own (or rent-to-buy).

Here's how a rent-to-own contract works: Like a traditional rental agreement, monthly payments are made to the property owner. But, unlike a typical rental contract, a portion of these payments, called rent credits, go towards a down payment on the rental property, to help the would-be buyer purchase the home at an agreed-upon future date.

 

Making the decision

If you've been grappling with the rent vs. buy decision, both renting and buying have their merits. Consider factors such as your need for flexibility, your financial situation, and your long-term goals. Whether you choose to rent or buy, the main thing is to make sure your decision fits both your lifestyle and your future plans.‌

How to Calculate Your Rental Budget

If renting is your optimal choice for now, it's a good idea to begin your search for an affordable rental by setting a realistic rental budget. A good rule of thumb is to spend less than 30% of your pre-tax monthly income on rent.4

Here's how to use this 30% rule to calculate your rental budget:

  • Determine your total monthly income before taxes
  • Multiply this total monthly income by 30% (or 0.30)

For example:

Total monthly income = $5,000

Total monthly income X 30% = 5000 X 0.30 = 1500

In this example, your rent should ideally be no more than $1,500, to ensure you have enough left over for all your other monthly expenses.‌

But you also need to consider how your rent payment fits into your total monthly budget. Expenses like utilities, internet, groceries, and transportation can quickly add up. It’s a good idea to create a detailed budget that includes all your monthly expenses—including your rent—so you’re not stretching yourself too thin financially.‌

And don’t forget to include tenant insurance in your budget. It's an essential expense that shouldn’t be overlooked. Tenant insurance not only covers your personal belongings in the event of theft or damage, it also provides you with financial protection if someone is unintentionally injured in your home—plus, your insurer will take care of your legal defense costs and help to pay for damages if you’re found legally responsible.^ Obtaining insurance is a smart move that offers significant protection for a relatively small monthly premium.

How to Rent a Home in Canada

Whether you’re a first-time renter or an experienced tenant looking for another home, having a clear plan can help you secure the right rental home quickly and efficiently. Let's take a closer look at some of the essential steps to finding and renting your ideal home.

 

Search for rental listings

Knowing where to look can be half the battle when it comes to finding an affordable rental home.

Places to search include popular rental websites and community bulletin boards. You might even want to drive around to see if you can spot any “For Lease” signs. Reaching out to a local realtor is also an option, as many real estate agencies will have agents experienced in helping clients specifically with rentals.

 

Be Prepared

In many rental markets across Canada, homes get snapped up quickly — which means you need to be ready to take quick action.

Most landlords will require specific documents from potential tenants, so having your documents already prepared and at hand can be helpful. For example, you may need:

  • proof of income or employment
  • references from previous landlords or employers
  • government-issued ID
  • a copy of your credit report (some landlords may accept this in lieu of doing a hard credit check)

 

Know your rights

Each province or territory has specific laws that protect tenants, covering everything from rent increases, security deposits, and what can (and cannot) be included in a lease agreement.

Taking the time beforehand to understand your local landlord and tenant laws will help you make informed decisions and protect you from unfair practices, all of which can add up to a smoother rental experience.

 

The rental application

Found a great rental? Chances are, you’ll need to fill out a rental application. Rental applications typically include personal information, employment details, and references. Landlords might also request proof of income and ask for your consent to perform background checks and credit checks.

Remember, provincial or territorial laws may restrict the information a landlord can ask for. And while a landlord can request your social insurance number (SIN), you’re under no obligation to provide your SIN5—in fact, providing your SIN can put you at risk for identity theft.

 

Security or key deposits

If a potential landlord asks for a deposit, be sure to check your province's landlord and tenant laws to see if deposits are permitted.

For example, in Ontario a landlord can only ask for a rent deposit equivalent to the last month’s rent, to be applied to the final month of your tenancy,6 while in Quebec, no deposits are permitted at all.7

 

The lease agreement 

You've landed a rental—congratulations! But before you sign that agreement, make sure you’re aware of the requirements for lease agreements under provincial or territorial law.

In both Ontario and Quebec, for example, a standard lease form is required—the Residential Tenancy Agreement (Standard Form of Lease) in Ontario8 and the lease form of the Tribunal administratif du logement in Quebec9—while BC lets landlords create their own lease agreements, but certain standard terms must be included.10

‌Even in today’s challenging rental market, renting a home doesn’t have to be overwhelming. With a bit of preparation and an understanding of the rental process, you can find a rental home that suits your lifestyle and your budget. Keep our tips in mind as you navigate the rental market, for a well-informed approach that can lead to a smoother rental experience.

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