Recent analysis suggests Canada’s rental market may not weaken as much or for as long as some forecasts predict because a substantial pocket of potential renters is being overlooked in standard data. Traditional measures of housing demand count new households by tracking people leaving parental homes and net migration, but they omit a growing segment of individuals and families doubling up—that is, sharing living space with others to cope with high housing costs. This group includes extended families living together, multiple unrelated adults cohabiting, and other shared arrangements that are common in expensive urban markets. Because these households aren’t fully captured in official counts, the number of people ready to enter the rental market once conditions improve is likely larger than currently estimated.

Economists argue that as rents fall and become more affordable, many of those who have been sharing housing out of necessity will seek their own units, creating a renewed source of demand. This “shadow” demand could absorb new or more affordable rental stock faster than expected, putting a floor under further rent declines. The phenomenon is particularly acute in high-cost cities, where doubled-up households make up a disproportionate share of the population.

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Housing affordability remains a central challenge in Canada despite recent downward pressure on rent levels. Although average asking rents have been falling for many months in a row, they are still above historical norms from before the pandemic. As prices fall, some individuals in shared arrangements may choose to live independently or pursue small property purchases, such as modest condominiums, adding a layer of complexity to demand dynamics.

Part of the difficulty in forecasting rental trends stems from how undercounted groups like non-permanent residents and students are in housing data. These populations have a high propensity to live in shared housing but often don’t appear accurately in official surveys. As a result, the size of the “doubled-up” cohort is likely bigger than policymakers or analysts assume, meaning the market may have more latent demand ready to activate when affordability improves.

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In essence, while slowing rent growth has been welcome news for tenants, the unrealized demand hidden in shared living arrangements could limit how far and how long rent declines continue, stabilizing the market sooner than many believe.