When demography outpaces construction: housing supply–demand mismatch and rent inflation in the Canadian provinces, 2015–2024

Purpose This paper aims to examine whether provincial rent inflation in Canada is associated with a flow-based housing supply–demand mismatch. It constructs a balanced panel of ten Canadian provinces from 2015 to 2024 and defines the mismatch index as annual population growth per 1,000 residents minus lagged housing starts per 1,000 residents. The study asks whether provinces where demographic growth outpaces construction experience higher CPI rent inflation, and whether this relationship intensified after 2021 amid rapid population growth and rising rental-market pressure. Design/methodology/approach This paper uses province-year panel data for ten Canadian provinces over 2015–2024. The main dependent variable is annual log CPI rent growth. The core explanatory variable is a flow-based supply–demand mismatch index combining population growth and lagged housing starts. Two-way fixed-effects models control for province and year effects, with wage growth included as a control. Robustness checks include alternative dependent variables, heteroskedasticity-robust and Driscoll–Kraay standard errors, leave-one-province-out tests, post-2021 interaction models and placebo break tests. Findings A one-unit increase in the mismatch index is associated with approximately 0.20 percentage points higher annual CPI rent inflation. The coefficient remains stable across alternative standard-error estimators, year-over-year rent-growth specifications and all leave-one-province-out samples. The post-2021 interaction is small and statistically insignificant, suggesting that recent rent acceleration reflects a larger mismatch rather than a structural change in the rent response. A false 2018 break is positive and significant, weakening the specificity of the post-2021 break hypothesis. Results remain robust when excluding Ontario, British Columbia or Alberta. Research limitations/implications The analysis is reduced-form and does not identify causal effects of population growth or housing construction on rents. CPI rent measures occupied-unit rents and may understate asking-rent pressure faced by new tenants. The provincial unit of analysis also masks metropolitan-level variation in housing supply, regulation and rental-market tightness. Nonpermanent resident data are available only for 2021–2024, limiting direct tests of recent immigration dynamics. The findings nevertheless suggest that policy responses should consider demographic growth and construction flows jointly rather than separately. Originality/value This paper contributes a new province-year panel data set and introduces a simple flow-based mismatch index linking demographic pressure to lagged housing construction. Unlike studies that examine immigration, population growth or housing supply separately, this approach combines demand and supply flows into one measurable provincial indicator. This study also tests post-2021 intensification, placebo breaks, alternative inference methods and province-exclusion robustness. Its value lies in providing a transparent reduced-form measure for assessing whether construction is keeping pace with population growth in Canadian rental markets.