A few years ago, Ryan thought he had cracked the code on homeownership.

He bought a three-bedroom house in Toronto with a basement unit, stretched his budget to make it work, and counted on the rental income to help carry the mortgage. His first tenant stayed two years, left in 2023, and when Ryan relisted, the responses came flooding in. He had his pick. He raised the rent by about 30 per cent.

Then his second tenant moved out in mid-2025.

This time, the response was thin. A lot of the applicants had unstable employment. Others wanted to pack in four or five roommates. Ryan eventually had to drop the rent from $1,925 to $1,765 before he finally found a couple willing to move in late in the year. "I am relieved," he said, "but it was a huge change. It was a big amount of stress that was added to the lives of my wife and I."

His experience is not unique. Across Canada, a lot of homeowners who bought near the peak of the market with rental income baked into their mortgage math are now discovering that the math has shifted.

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The Population Swing That Changed Everything

In 2022 and 2023, Canada's population surged at a pace not seen since the late 1950s. The country added over one million people in 2022, then another 1.27 million in 2023, driven almost entirely by international migration. The federal government had opened the doors to foreign workers and international students as the country emerged from the pandemic with hundreds of thousands of unfilled jobs. Demand for housing, including rental housing, surged with it. The bidding wars renters remember from that period were not random. They were a direct result of far more people competing for a constrained supply of units.

Then the federal government reversed course. Through 2024 and into 2025, Ottawa introduced a series of policy changes targeting temporary residents, cutting international student permits and tightening pathways for foreign workers. Permanent resident targets were also brought down, from 485,000 in 2024 to 395,000 in 2025, with further reductions to 380,000 in 2026 and 365,000 in 2027.

The result was stark. According to Statistics Canada's preliminary estimates, Canada's population shrank by about 102,000 people in 2025, the first annual decline in records dating back to the 1940s. Statistics Canada cautions the figures are preliminary and may be revised as more complete data on permit extensions becomes available, but the direction is unmistakable. The outflow of temporary residents, mainly students and workers whose permits expired, was concentrated in Ontario and British Columbia.

The rental market felt it almost immediately.

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What Happened to Rents

National average asking rents have now fallen for 17 or more consecutive months, sitting around $2,008 in March 2026, their lowest point in nearly three years. That is roughly $200 below the peak. But rents still sit about 14 per cent above pre-pandemic levels, so the softness is real but relative. Landlords are not in uniform distress, and tenants are not exactly celebrating either.

The decline runs deeper in some markets than others. Toronto asking rents have fallen roughly $337 from their peak, with condo apartments off around 7 per cent year-over-year. Vancouver vacancy rates hit levels not seen since the late 1980s, according to CMHC's 2025 Rental Market Report. Markets like Edmonton and Ottawa held or grew through parts of this period.

Two forces are pushing in the same direction. The slowdown in population growth directly reduced demand for rental units. And a wave of new supply, particularly condos, hit the market at exactly the wrong time.

Many of those units were originally built to be sold. With resale demand weak and buyer financing difficult to secure, developers and investors began listing them for rent to generate some cash flow instead. CMHC noted that newer projects in Toronto, those completed since 2022, were sitting at vacancy rates close to 7 per cent, and that three-quarters of them were offering incentives, typically one or two months of free rent, just to get tenants in the door. The rental supply that appeared was not the result of planning. It was a condo market that ran out of buyers.

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Who Gets Squeezed the Hardest

Not all landlords are feeling this equally. Large purpose-built rental operators can absorb a soft quarter more easily. Individual condo investors, by contrast, tend to have less runway.

CMHC's 2025 report notes that the GTA's condo rental vacancy rate sits around one per cent, which sounds tight. But individual condo investors have a lower tolerance for vacancy and are more willing to cut rents quickly to fill units. They are competing with each other and with purpose-built buildings offering free months, newer finishes, and better amenities. An individual landlord carrying a 2021-era mortgage in a 2025 rental market is caught in an uncomfortable middle. CMHC's analysis of Toronto and Vancouver found that carrying costs for condo investors grew about 24 per cent since 2022, while average rents rose only about 15 per cent. For some, that spread has turned a cash-flow-positive investment into a monthly shortfall.

The group under the most pressure tends to be buyers who entered between 2021 and 2023. Those were the people who bought at high prices, took on large mortgages at what looked like manageable rates, and banked on strong rental income to cover the gap. Then rates climbed. And rents, which for a while climbed alongside them, started coming down. Some landlords are now absorbing hundreds of dollars a month in shortfall, and for those without reserves, that is enough to force a decision.

Some are selling. Others with stronger financial positions are holding on, betting that the market eventually turns. As Ryan put it: "Back then, everyone was thinking, 'Oh my god, this is easy money, free money.' Now, they are making noise and saying, 'Is this really worth it?'"

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Is a Recovery Coming?

The near-term picture is still softening. RBC Economics projects asking rents will continue declining through 2026, and BMO's senior economist noted in March 2026 that Canada is now in an era of normalization, with population growth of around zero expected through 2027 before returning to a baseline of just under one per cent.

The longer view is more constructive, but only conditionally. New condo construction has slowed sharply as presales collapsed, which means fewer units will be entering the market in a few years. CMHC's Spring 2026 Housing Supply Report confirmed that unsold inventory surged and that tighter financing conditions are already chilling new project launches. Less supply coming means tighter conditions ahead, the question is when.

Whether Canada's population returns to meaningful growth depends on immigration policy, which is actively being adjusted and could shift again. But near-term, the trajectory points to continued soft demand.

For landlords, the question is not whether the market eventually tightens again. It likely does. The real question is whether the carrying costs between now and then are manageable, and whether the original assumptions behind the purchase still hold.

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If you are weighing rental income as part of a buying decision in the Okanagan or elsewhere in BC, those assumptions deserve a harder look today than they did two years ago. The team at Coldwell Banker Horizon Realty can help you run the numbers honestly. Reach out here, or explore our property management services if you are already a landlord navigating this market.