A certain amount of tenant turnover is inevitable. However, some landlords experience significantly higher turnover rates than others, and there are often predictable trends or patterns behind this.
Fortunately, there are also proven ways to reverse this effect and improve profitability.
This article will explore several approaches to reducing tenant turnover rates, providing property managers and landlords with actionable strategies they can implement immediately.
What Is Tenant Turnover?
Tenant turnover refers to the process that occurs when an existing tenant vacates a rental property, and a new tenant moves in.
While this is part of the normal life cycle of a rental property, it has associated costs that can significantly eat into your cash flow significantly.
As you’ll see below, there are several ways tenant turnover costs property managers. One of the most substantial costs, however, is properties remaining vacant and not generating any rental income.
Canadian Tenant Turnover Statistics: What’s Normal?
We will soon know the results for 2024, but at the end of 2023, Canadian tenant turnover rates were 12.5%, down from 13.6% in 2022.
Certain Canadian cities were outliers.
For example, Saskatoon had the highest tenant turnover rate at 36.5%. Rental markets with lower vacancy rates, including Toronto and Vancouver, had noticeably lower tenant turnover rates (8.3% and 8.1%, respectively).
Tight rental markets with higher demand often experience more stability as tenants are less likely to move, knowing their options may be limited.
Property management companies operating in cities with higher tenant turnover rates face substantial challenges, making it critical to focus on strategies to reduce apartment turnover and associated costs.
How to Calculate Tenant Turnover Rate
The tenant turnover rate is a meaningful metric for evaluating the stability of your rental properties.
It provides insight into how frequently tenants move out of your units and helps evaluate the usefulness of your property management strategies.
To calculate the tenant turnover rate, count how many tenants moved out during a specific year. Then, divide this number by the total number of residents in the properties you manage. Multiply that number by 100 to get a percentage.
So, if five tenants moved out of a building and the total number of tenants you had in that year was 16, you would divide five by 16.
This gives you 0.3125. Multiplied by 100, your tenant turnover rate would be 31.25%
The Financial Effects of High Tenant Turnover Rates
As we touched on above, tenant turnover costs can add up fast, especially when compounded across multiple rental units.
These include:
- Maintenance and Repairs: Between tenancies, cleaning, painting, and light repairs are often necessary.
- Lost Income: A vacant property generates no rental revenue, impacting cash flow.
- Showings and Marketing: Advertising vacancies, listing properties online, and conducting tours incur both time and monetary costs.
- Administrative Efforts: Reviewing applications, screening tenants, and managing lease renewals are resource-intensive tasks.
In some cases, tenant turnover costs can amount to thousands of dollars per unit. This stresses the value of proactively addressing tenant turnover rates and taking steps to lower it.
Strategies to Reduce Tenant Turnover
Improving tenant retention starts with understanding what encourages tenants to stay or leave.
Implementing thoughtful measures like the ones below can help reduce tenant turnover rates and improve the profitability of your rental property portfolio.
1. Offering Rental Deposit Alternatives
For many tenants, the prospect of not having to pay a security deposit for a rental property can be enough of an incentive to sign or renew a lease.
Rental deposit alternatives reduce the upfront financial burden for tenants. This technique can be especially effective in markets where renters face affordability challenges.
However, any tenant can appreciate the option of having an alternative rental deposit solution.
Some of these solutions include:
- Deposit insurance
- Surety bonds
- Deposit waivers
- Payment plans
Read more about rental deposit alternatives here and how they benefit tenants and landlords alike.
2. Keep Rent Prices Competitive
Tenants frequently move owing to rent hikes that exceed market prices. Regularly analyzing local tenant turnover figures and aligning pricing with the market helps you keep tenants while being profitable.
3. Prompt Maintenance
Addressing maintenance issues quickly helps prevent dissatisfaction. A well-maintained property signals to tenants that their comfort and safety are your priorities.
4. Updating Amenities
Long-term residents want modern amenities such as energy-efficient appliances and smart home systems. Investments in upgrades can increase tenant satisfaction and reduce tenant turnover rates.
5. Enhanced Security
Tenants value safety, and adding security measures such as better lighting, cameras, and keyless entry systems can make rental properties more appealing.
6. Regular Inspections
Routine property inspections help identify and address issues before they escalate. Tenants appreciate proactive management and may feel more comfortable staying long-term.
7. Comprehensive Tenant Screening
Selecting the right tenants from the start reduces the likelihood of conflicts or evictions. Thorough screening ensures tenants are reliable and compatible with the property’s policies.
Read about seven of the best tenant screening options in Canada next.
8. Acting on Feedback
Listening to tenants’ suggestions and implementing reasonable requests builds trust and shows tenants their opinions matter.
What Drives High Turnover Rates?
Understanding these drivers allows property managers to contextualize turnover figures and find opportunities for improvement.
For example, neighbourhoods with a big number of college students frequently see much higher turnover rates. Students usually rent for a brief time before moving out after graduation or to explore job prospects.
Similarly, regions with seasonal or temporary workers, such as resort towns or cities with a significant contractor population, may see more frequent renter turnover.
Urban rental properties, particularly those in high-demand markets such as Toronto or Vancouver, tend to have lower turnover rates.
In these cities, tight rental markets and limited availability encourage tenants to stay longer, often renewing lease agreements to avoid the challenges of relocating.
Other variables contributing to high turnover rates are:
- Affordability Issues: Tenants may depart if rent hikes exceed pay growth or if surrounding homes provide more inexpensive options.
- Lack of Community Facilities: Properties without modern facilities or community-oriented features may struggle to keep residents looking for a better quality of life.
- Poor Property Management Practices: Slow response times to repair requests, as well as unethical management, can drive renters to seek out better-managed homes.
- Demographic Trends: Younger renters, such as millennials and Gen Z, are more likely to relocate, spurred by lifestyle changes, career possibilities, or a desire for better living conditions.
Learn More About Rental Deposit Alternatives
Anything you can do to create a better experience for tenants, financially and otherwise, can reduce turnover rates.
Implementing these strategies we’ve shared today, including rental deposit alternatives, helps property owners reduce costs, improve tenant satisfaction, and strengthen their rental property business for the long term.
To learn more about rental deposit alternatives, see how Rental Deposits Now works here.
Interested in learning more about reducing tenant turnover rates?
Try one of these articles next:
- Streamlining Tenant Onboarding with Deposit Alternatives: A Guide for Landlords
- Making Renting Stress-Free with No Security Deposit
- Enhancing Tenant Satisfaction with Deposit Alternatives in the Canadian Rental Market
