Halifax's rental vacany rate narrowed to 1 per cent in 2021 and 2022, and CMHC forecasts a modest improvement to 1.3 per cent in 2023 and 2024 as new inventory comes into the market, but then a swift drop back to 1 per cent again by 2025.DARREN CALABRESE/The Globe and Mail
New rental units in Nova Scotia’s capital are hitting the market at their fastest pace in a decade – but it won’t be enough to meet the demand from the city’s rapidly growing population.
According to a new report from Canada Mortgage and Housing Corp., the vacancy rate in Halifax’s rental market is expected to remain near the record lows hit early in the COVID-19 pandemic. After the rate narrowed to 1 per cent in 2021 and 2022, CMHC forecasts a modest improvement to 1.3 per cent in 2023 and 2024 as new inventory comes into the market, but then a swift drop back to 1 per cent again by 2025.
The report also projects the average price for a two-bedroom unit will jump by 14 per cent over the next two years
The surging demand is putting heavy pressure on the area’s construction companies, said Duncan Williams, president and chief executive officer of the Construction Association of Nova Scotia. The industry in Halifax and across the province is constrained for a myriad of reasons, including high costs and a work force reduced by the COVID-19 pandemic.
Mr. Williams said the pressure on the industry is something he hasn’t seen “in this lifetime.”
“The last time we would have seen this would have been, frankly, after the Great Depression and the Second World War.”
In the first seven months of 2023, CMHC forecasts that 1,704 units are expected to open in Halifax – more than double the number that opened in that time frame in 2022, and the most in the past 10 years. Around 6,000 additional units were under construction in each of 2022 and 2023. That’s the most rental units in progress in the past decade.
Even so, the city’s booming population growth rate will continue to overwhelm the market. Statistics Canada data released in January said Halifax was Canada’s second-fastest-growing city in 2022. The city of more than 480,000 grew 4.4 per cent – behind only nearby Moncton.
At the same time, CMHC reported a slowdown of new project launches, which will curb growth of new supply.
Matt Danison, CEO of the Rentals.ca Network – which researches rental supply and prices in Canada’s major cities – said the supply issue in Halifax is “concerning,” because the city may not keep up with its projected growth in coming years.
“There’s not really an easy way to slice and dice it to where it makes sense on how to solve this,” Mr. Danison said.
In recent years, the city has become more popular with other Canadian residents and immigrants to Canada. As the cost of living in cities such as Toronto and Vancouver has skyrocketed, Halifax’s lower rents and home prices have been one reason for its population boom. Mr. Danison said Halifax also “jumps out” as a friendly Atlantic Canadian place with a culture mix of small town and city.
Mr. Danison said inflation and rising interest rates are having an impact on Halifax’s crowded rental market as well. Inflation has had widespread effects, including higher construction costs, that threaten to slow the completion of new units.
He said renting is most popular with newcomers to the city, especially young adults and new Canadians. “Most people immigrating here are probably not going to jump into buying a place right away. They want to build credit and get established.”
As prospective first-time home buyers have been “on the sidelines” since last year by rising interest rates, Mr. Danison said they too have chosen to rent, further straining supply. Concerns of a recession have also contributed to the growing demand.
Planners in Halifax worry about a vacancy crisis. Kate Greene, the city’s director of regional and community planning, said staff have responded by trying to issue more building permits through a new online system.
With the city struggling to keep up with demand, Ms. Greene said Halifax is prepared to “enable more innovative forms of housing” to quickly boost the supply of affordable housing. At the centre of the approach are secondary suites – additional units inside a home or on its property.
“Creating opportunities for general density has been a big focus of ours. That can help people afford home ownership and create more affordable units,” she said.
Halifax has taken other measures over the past year to expand options for rental units. Last October, Halifax Regional Council eliminated minimum single-unit dimensions, paving the way for alternatives such as tiny homes. As for existing units, the council voted in February to start regulating short-term rentals such as Airbnbs this coming September. Councillors hope this will secure more units for long-term renters.
Mr. Williams of Nova Scotia’s construction association has urged Halifax planners to “maximize opportunity” for building housing. That includes encouraging more projects that can be built quickly and efficiently, rather than costly and time-consuming projects such as new high-rises.
Until then, Mr. Williams said Halifax risks falling behind other Canadian cities in development. He called on the government to discuss a better plan for the future.
“We have to start speaking the truth and work collaboratively on some of these things.”