Ottawa's balanced vacancy band is 2% to 4%, and we're at 3%

CMHC has spent decades letting the industry treat 3% as the line between a tight rental market and a soft one. In June it published the work showing that number was never right.

The new framework gives every major market its own balanced band. Ottawa's runs from 2.0% to 4.0%. Our 2025 apartment vacancy rate came in at 3.0%.

Dead centre. Of the seven markets CMHC published, Ottawa is the only one sitting at the exact midpoint of its own range.

That sounds like good news. For an owner it is the most expensive line in the report.

What the band actually measures

Read CMHC's definition carefully. It does not say healthy and it does not say normal.

The balanced range is the vacancy rate at which rent growth, after inflation, is near zero. Below the band, rents rise faster than inflation. Above it, rents fall behind. CMHC estimated the ranges from Rental Market Survey same-sample rent changes and vacancy data going back to 1990.

So when CMHC calls Ottawa balanced, that is an arithmetic statement, not a mood. At 3.0% vacancy, the historical relationship says your rent roll grows at inflation and no faster.

If the spreadsheet you bought the building on has rents climbing 3% a year against 2% inflation, you have penciled in a point of real growth that Ottawa has not delivered at this vacancy rate.

The seven bands, and who sits where

Vancouver's band is 2.0% to 3.0% and it sits at 3.7%, above the ceiling. Halifax runs 3.0% to 4.5% and sits at 2.7%, below the floor. Toronto 2.5% to 4.0%, at 3.0%. Montreal 2.5% to 4.0%, at 2.9%. Calgary 3.0% to 5.5%, at 5.0%. Edmonton 3.5% to 6.0%, at 3.8%. Ottawa 2.0% to 4.0%, at 3.0%.

Two things fall out.

The old rule of thumb would have called Vancouver at 3.7% comfortable and Calgary at 5.0% a catastrophe. The real answer is the reverse. Vancouver is the one sitting above its own band. Calgary is still inside its.

Then look at the widths. Vancouver's band is one point wide. Toronto, Montreal and Halifax get a point and a half. Ottawa gets two full points. Calgary and Edmonton get two and a half.

Width is temperament. CMHC says it plainly, that Montreal, Ottawa and Halifax have had less volatility and more gradual transitions between tight and soft conditions. In Vancouver, half a point of vacancy moves rents. In Ottawa you can drift a full point either side of three and very little happens to your rent roll.

That is the Ottawa trade, stated more honestly than most pitch decks state it. You are not getting a Calgary-style rent run here. You are also not getting the Calgary-style drawdown. If you bought Ottawa for the boring, this is the boring working as advertised. If you bought expecting a spike, you bought the wrong city.

Both of your rent levers are pinned to inflation

There are two ways to raise rent on an Ontario unit. Right now both are capped at roughly the inflation rate.

The sitting tenant is the first. The 2026 guideline is 2.1%, down from 2.5% in 2025, and Ontario has already posted 1.9% for 2027. Against August's headline CPI of 3.0%, a 2.1% increase is a real cut. Against the Bank of Canada's core measures, which averaged 2.0% in August, it is a wash. I went through the 2027 number when it landed.

Turnover is the second, and it used to be the event you waited for, the one moment the guideline does not apply and you reset to market. CMHC's index says Ottawa asking rents for two-bedroom apartments peaked in the first quarter of 2025 and have fallen every quarter since. On their series, with the first quarter of 2024 set to 100, Ottawa hit 108.7 at the peak and closed 2025 at 104.4.

About 4% off the top, while your sitting tenant went up 2.5% and then 2.1%.

Run that through. A tenant who signed at the Q1 2025 peak and has since taken one guideline increase is paying about 111 on that index. The same unit advertises today at 104.4. That tenant is roughly 6% above market. If they leave, turnover is not your raise. It is your pay cut. Ottawa also turns its units over faster than most big markets, so this arrives sooner than you think.

The rent control exemption is not paying off the way it was sold

Here is the part I did not expect.

Ontario exempts from the guideline any unit first occupied for residential purposes after November 15, 2018. No rent control, reset whenever you like. That exemption has been the entire pitch for buying new.

CMHC's survey found vacancies are highest in structures built after 2020 and in units near post-secondary institutions. Older stabilized buildings and family-sized units are still tight. Operators told CMHC that new units are taking months to fill and that incentives have escalated to as much as several months of free rent, plus free parking, gift cards, move-in credits and sometimes cash.

An uncapped rent you cannot charge because the unit is empty is worth less than a capped rent you collect every month.

For a small Ottawa investor that inverts the usual advice. The unglamorous older building with three-bedroom units and a tenant who has been there six years is the asset with pricing power right now. The new one near a campus is where the vacancy is.

The demand side is why I am not calling this a downturn

One number keeps Ottawa from sliding out the bottom of its own band.

CMHC's household model has Ottawa adding 1.3% more households in 2026, with 0.8 points of that coming from population growth alone. Compare the population contribution elsewhere: Toronto 0.2, Calgary 0.6, Edmonton 0.9, and negative 0.4 in both Vancouver and Montreal.

Population is subtracting from household formation in two of the three largest rental markets in the country. In Ottawa it is the single largest contributor. That is what holds 3.0% in place.

What I would actually do with this

Underwrite zero real rent growth. Not zero nominal, zero real. Use the guideline, assume it tracks inflation, and stop modelling a turnover premium until that asking rent index turns back up.

If a deal only works with rent growth above inflation, the deal does not work. The return has to come from the spread between your cap rate and your cost of debt, plus principal paydown, minus capex, and I ran the mortgage constant version of that math two weeks ago. I sell houses, not mortgages, so take the financing half of it to a broker before you sign anything.

Sitting at the midpoint of your own balanced band is not a problem. It is just not the same thing as a tailwind, and a lot of Ottawa pro formas were built assuming one.

If you own rental property here and want someone to pressure-test your numbers against what is actually renting, call me at 613-262-6545 or email fil@613realtor.ca. Bring the real rent roll, not the one from the listing.