Halifax’s apartment rental vacancy rate has dropped to a new low of 1% — below that of Toronto, Montreal, and Vancouver.
The Canadian Mortgage and Housing Corporation (CMHC) released its 2019 fall rental market survey on Wednesday. The numbers represent privately-owned apartments in buildings with three or more units, based on an annual survey conducted in October.
Last year’s vacancy rate, 1.6%, was lower than it had been since CMHC started tracking this data in the late 1980s.
The plummeting vacancy rate has pushed average rent in Halifax up 3.8% to $1,113.
Here’s how it breaks down by unit type:
- Bachelor apartments are now renting for an average of $812, with a vacancy rate of 1.3%
- One bedrooms are renting for an average of $959, with a vacancy rate of 1%
- Two-bedrooms are renting for an average of $1,202, with a vacancy rate of 0.9%
- Three-bedrooms are renting for an average of $1,390, with a vacancy rate of 1.2%
“These are very bad numbers for affordability and for the kind of complete communities we’re trying to build,” Coun. Waye Mason said on Wednesday.
“There’s no way around it. This really does emphasize that we have a housing crisis.”
In Mason’s district, the south end and downtown Halifax, CMHC says the vacancy rate dropped 0.7 percentage points to 0.4% — despite a 7% increase in supply.
Mason has been advocating for Halifax taking back the responsibility for delivering housing from the provincial government, with a report expected sometime in the next year. He said some provincial politicians have been blaming the municipality for the housing crisis.
“(Liberal MLA) Labi Kousoulis has been telling people in our area that HRM isn’t allowing building fast enough and isn’t allowing big enough buildings,” Mason said.
“Not only are we building at an unprecedented rate right now, but we also have thousands of units approved going back seven, eight, nine years that aren’t even built.”
CMHC’s report says there are currently a record 4,000 units under construction in the city and there were more than 1,000 units completed last year, but the added supply isn’t meeting demand.
“Due to higher demand, the vacancy rate continues to drop, despite consistent growth in rental supply,” the report said.
The report attributes the increased demand, as it has over the past few years, to demographics. Seniors are downsizing and moving into rentals, unemployment is down, and interprovincial migration and international migration are up.
“Population gains from international migrants in particular, has been a significant factor contributing to higher demand for rental apartments in recent years,” the report says.
“In fact, since 2016, over 18,000 new permanent residents have settled in the Halifax region.”
Neil Lovitt, vice president of planning and economic intelligence at real estate consulting firm Turner Drake, said there’s no evidence that population growth is slowing down.
The one scenario Lovitt feels could ease the rental crunch is if newcomers start buying rather than renting.
“If you’re coming on a temporary basis or if you’re coming from another country, you might rent in the immediate term as you kind of find your feet, but a lot of people that do immigrate to Canada in general come with a hope or a dream of home ownership,” he said.
“That might be a bit of a saving grace for this rental situation.”
Lovitt said it’s “disconcerting” for people in the rental market to see Halifax’s vacancy rate surpass the levels seen in Toronto and Vancouver over the past few years.
“Now that we’re into sort of a similar or even tighter vacancy rate in Halifax, we can probably expect to see some more dramatic increases in rent across the board,” he said. “That really doesn’t bode well for the next couple years for renters.”
In terms of solutions, Lovitt said the provincial government can continue to hand out rental supplements to those in need — its preferred method of delivering housing — or it could increase social assistance rates, but those are only stop-gap measures.
“Ultimately, if you’re just subsidizing the demand, that’s just eventually going to filter down into the pockets of the building owners and operators,” Lovitt said.
The only long-term solution is to build housing.
“We have been fortunate in the last number of decades really in HRM to have the private market be able to deliver most of that,” Lovitt said.
“I think we’re getting to a point now where it’s not possible and the public sector has to step back in in a fairly significant way. And that’s pretty much the case across the country, in most major Canadian cities.”
Mason agrees.
“If we’re going to keep growing by 2% per year in terms of population that means that it will take a while for the market to adapt,” he said.
“Clearly we need to have direct government investment in affordable housing that results in affordable units.”
The Nova Scotia NDP issued a statement from Halifax-Needham MLA and housing spokesperson Lisa Roberts on Wednesday calling on the governing Liberals to step up.
“There are things the Liberal government can do that can help people find an affordable place to live,” Roberts wrote.
The NDP is calling for rent control, short-term rental regulations, and support for the development of non-profit, cooperative and public housing.
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I think its a combination of “all of the above”. short term rentals are having an impact on the market, but are not the driving force. I think Halifax is hitting its stride as a mid sized city that offers a good quality of life. the in migration to Halifax reflects that. most provinces have 70% of their population living in major cities. Halifax represents almost 50% of the province of NS, so we should keep seeing more people in to halifax from Digby, Port Hawkesbury, etc to access university education, jobs and to be close to the medical complex and airport if you are retiring.
Halifax has seen 24,500 new residents move to the city in the past 3 years. if each new household had 2.45 people, then we would need 10,000 new houses and apartments to accommodate them. that matches peak housing production from past years, so the construction industry is going to have to go flat out in the future if we want to even tread water.
I continue to be amazed at the level of construction we are seeing, and it’s all being enabled by lifetime low interest rates. Heaven help us if rates increase too much, as the economics of many projects will stop working. Development feasibility is simple: the investor needs a spread of return over the cost of the mortgage interest on his/her investment. If an apartment cost $250,000 (yes, that is a real number these days) and mortgage funds are say 3%, then they will likely need a 5.5% rate of return to make it worth the risk (and recognizing as an alternative they could just buy a bond and go to the beach), then they need $250,000 x 5.5% or $13750 per year ($1145 per month) after all expenses. operating a new apartment unit is about $5500 per year in this price, range, so the average rent needs to be about $1600 per month. if the cost is $300,000 per apartment (its $400,000 in Toronto and high end buildings are seeing $300K in Halifax and are set to go higher), then the average rent needs to be $1875 per month.
CMHC numbers are all based on averages. the average value of a car in the Sobey’s parking lot is an interesting number, but doesn’t help you understand the cost of a new car.
What can HRM do?
– keep its municipal plans up to date so that we have a constant supply of new developments.
– keep development charges to a reasonable level.
– enact legislation to tax AirBnB, and limit it to areas that are appropriate (not single family homes in suburbia). in BC, they use the tax to fund more affordable housing.
– Rental supplements can be a useful ST fix, but not a long term one. we need a stronger nonprofit sector that can build own and operate high quality mixed income affordable housing projects that can provide long term affordability. the old model of 100% subsidized units doesn’t work, as the long term cost of capital repairs ensure that the building is always under capitalize and needs more capital grants.
– do NOT enact rent control. all the literature says that it shuts down the supply of new housing (in Berkeley, CA you can see the impacts that 50 years of rent control have had – dilapidated housing at subsidized rates for university professors who won’t move). it doesn’t work.
my thoughts
I wonder how much the vacancy rate would increase with short-term rental legislation?
There was a study published recently that showed that about 2.5% of the housing in peninsular Halifax are short-term rentals. The vacancy rate could be tripled if it were mostly banned.
I’m hoping to write about that soon, but long story short: the vacancy rate wouldn’t change much at all.
The CMHC numbers only count the primary market — buildings with three or more units. Many airBnBs, and likely most, aren’t in those buildings, but in houses with two flats or whole homes (the secondary market).
That said, there would be more apartments available, so people looking for a place might have an easier time.
Thanks, Zane. I was curious about the numbers, so it’s good to know that short-term rentals are not the main reason for the vacancy rate, though I still fully support their regulation.
Another thing the province can do to make housing more affordable is increase the minimum wage. Rental increases become more affordable when you make enough money to afford the increase. I’m curious to know how much property management companies pay their own employees. If their own employees do not make enough money to live in the buildings they rent, then they’re basically relying on others to subsidize their business. Halifax relies too heavily on money from away.
Tempa
just because HRM starts regulating short term rentals, doesn’t mean that landlords are going to stop doing it. if it’s that much more profitable than long term rentals, they will just build the extra costs into their business model.
Meanwhile, I have a house in the Valley I am trying to sell. No takers, and it is not a mansion or anything. All comes down to location.
A friend advertised an apartment a week ago and received 100 calls.