April 13, 2026 | Shortages Create Gluts

Happy Monday Morning!

As we have highlighted previously, the rental market is undergoing a significant correction, and it appears poised to continue.

The city of Vancouver saw 2300 purpose-built rental units completed in 2025, the highest in four decades!

Keep in mind this is completions. We still have a pipeline full of rentals still under construction across Metro Vancouver that will be completing soon.

“We experienced a surge of housing completions — both in condominium and rental space — in the past year … and we expect this to continue for the next couple of years,” Shiva Moshtari-Doust, CMHC’s lead economist for B.C.

As a result, the vacancy rate has surged to a thirty year high in Vancouver, per CMHC.

Meanwhile, a recent report from Rentals.ca shows that rents continue to fall, dropping 5% on a year over year basis for one bedrooms, and 3% for two bedroom units.

Over the past three years, rents are now down 14% in Vancouver, an unprecedented move.

Just to recap, we built a record number of new rental housing, the vacancy rate increased, and that pushed rents lower.

In other words, the economic laws of supply and demand still hold true. Go figure.

As we have always argued, the housing crisis is almost entirely self-inflicted through policy decisions.

For once they may have got something right. Government increased the supply of credit (CMHC MLI Select) to the rental construction business, which spurred the private sector to build more rental housing, while at the same time they throttled the supply of immigration (population growth has gone from 1.2 million to zero).

Voila, affordability cometh.

This is playing out across the country, not just in Vancouver. The average asking rent in Canada fell to a 35 month low in March, with rents now falling for 18 consecutive months.

Every indication suggests the decline in rents should continue. Population growth is poised to remain anemic, and there’s still a ton of new supply nearing completion.

A healthy, well supplied rental market takes pressure off the resale market. Think about what we had a few years ago. The vacancy rate was sub 1% and rents were rising by 10% a year. This spurred speculation, investors came rushing in, betting on ever higher rents, creating excess demand in the resale market and increasing home prices. People who would normally rent decided to buy not only out of fear of missing out but also because they got sick of having to move every few years when their landlord decided to sell and cash in on the record prices.

Now we have the opposite. A well supplied market with falling rents has curbed speculation. The investors have disappeared, which is creating issues in the pre-sale market, while falling rents are killing purpose-built rental proformas. Yes, we’re sowing the seeds for the next supply shortage.

Shortages create gluts. Gluts create shortages. This is the cycle.

Steve Saretsky April 13th, 2026

Posted In: Steve Saretsky Blog

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