If there is one thing for sure in Canada, it is that rent is only increasing in a country already home to some of the most expensive cities to live in in all of North America. In fact, the average rent for all Canadian properties listed on Rentals.ca in April 2022 was $1,821 per month, up 9% on April 2021. With real estate prices already extortionate, the picture for renters is not an ideal scenario either. This is a hard pill to swallow when over a third of Canadians rent properties, with many of us having no other option. With rental costs set to continue rising, it is so important to understand affordability when it comes to renting, and how to manage your finances accordingly. So, how much should you spend on rent in Canada? In this article, we share all you need to know on how much to spend on rent in Canada and we provide some tips and tricks for making your life easier as a renter.
What is the average monthly rent in Canada?
According to Rentals.ca, the average monthly rent in Canada is a staggering $1,821 per month as of April 2022. This covers all kinds of rental properties across the country, from one-bedroom apartments through to houses with multiple bedrooms. Unsurprisingly, the monthly average rent is inflated by the expensive living costs of cities like Toronto and Vancouver. In these cities, you can find luxurious apartments that may not be as common in another city like Winnipeg. In Vancouver, the average monthly rent of a two-bedroom property is up 24% year on year, while the equivalent in Toronto is up 17%. Interestingly enough, the average monthly rent for a one-bedroom apartment has decreased slightly as Canadian renters seek out more space for their homes. Comparatively, when it comes to the cheapest rental regions in Canada, you should head for the prairies. Among the cheapest Canadian cities to find rentals are Regina, Edmonton, Winnipeg, Gatineau, and London. All of these cities offer affordable rentals with a monthly rent that is below the national average.
How much should you spend on rent in Canada?
Generally speaking, when it comes to how much you should spend on rent in Canada, up to 30% of your monthly income is a safe bet. 30% of your gross income should cover your rent, bills, and any other living expenses you incur. If your living expenses are over 30% of your monthly income, this is deemed unaffordable. Sometimes, costs like utility bills can be difficult to predict, dependent on factors like the weather. You can use a site like MovingWaldo to gain a clearer idea of the average cost of bills like water, internet, electricity, and so on. This can help you to determine how affordable a rental is for you and your income before you choose to move in. Another way some Canadians choose to determine how much should you spend on rent is by applying the 55% rule. This is when all of your housing costs plus additional expenses like your cell phone bill, cable, and so on are within 55% of your net monthly income. Consider what works best for you and use this to measure your rental affordability.
How much monthly income do you need to live in a city like Toronto or Vancouver?
There is no denying that living in one of Canada’s most expensive cities like Toronto or Vancouver will very rarely be cheap. With access to a corporate world and the top-class restaurants, entertainment facilities, and sporting events of a large city, it is bound to come at a cost. In downtown Toronto, the average monthly rent is currently $2,326. Of course, as you begin to move away from this area into the Greater Toronto Area, you will see average rents start to drop to around $1,831 in Scarborough. This means you would likely need a gross income of around $82,000 to live comfortably in Toronto’s suburbs with a partner or roommate, in line with the 30% affordability rule of thumb. As for Vancouver, once again monthly average rent is notoriously high. The average rent is a whopping $2,925 – even more than Toronto. Using the 30% rule, you would need to earn a gross annual income of $90,000 to live in a one-bedroom apartment in Vancouver. Once again, rents drop as you move into the suburb of nearby Burnaby to around $1,959 per month for an equivalent rental.
What if you cannot afford your rent in Canada?
Of course, determining whether or not you are paying too much rent is dependent on your own preferences. Perhaps you would prefer to pay more to live in a specific neighbourhood. Maybe you would prefer to cut back on travel to be closer to work. If, however, you are trying to live by the 30% rule of thumb, this could become problematic for you. Going over this threshold could mean you are forced to reduce your expenses elsewhere, or to find a cheaper rental. In more extreme instances, you could suffer from more serious financial difficulties. Perhaps you are struggling to pay your rent each month. This can lead to poor references, negative impacts on your credit score, and even action from your landlord. Your landlord could choose to take you to court, seek compensation for missed or late payments, and even proceed with eviction. Before it gets to this stage, you will receive a notice for non-payment of rent. Before you suffer any of these consequences, here are some actions you can take if you are struggling to pay your rent in Canada:
- Visit a rent bank – rent banks in Canada offer to cover a varying amount of rent at either a no-interest or low-interest rate via an emergency loan. This is available through a flexible payment schedule. You need to qualify beforehand, but check to see if there is one in your city.
- Friends or family – your network or contacts may be able to help you temporarily to make ends meet. Even your employer may be able to offer an advance on your next month’s pay.
- Speak to your landlord – you may be able to negotiate with them, like reducing a month’s payment in exchange for carrying out chores, or delaying your payments while you seek out additional funds.
- Meet with a Licensed Insolvency Trustee – Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. Consumer proposals can reduce your debt by up to 80%, and bankruptcy can eliminate your debts altogether while keeping creditors at bay.
So, how much should you spend on rent in Canada? If you have more questions around your rent or are struggling with financial difficulty, book a free consultation with Spergel. Our trustees have been helping Canadians to begin fresh financial futures for over thirty years, especially when living expenses and rent simply become too much. Reach out today – you owe it to yourself.