Laura Sherry searched for a better apartment in Prince Edward Island for more than two years.
With a baby on the way, Ms. Sherry and her fiancé wanted to upgrade from their basement unit, which had mould issues. But the rental market had few options in their price range, and competition was fierce for new listings.
Making matters tougher, some landlords told her outright they didn’t allow children. So the young family has decided to call off their search and stay put.
“I have zero hope at the moment” for finding a bigger rental, Ms. Sherry said. “My goal within the next two years is to [buy] a house and be out of the rental market.”
Stories like this are common in PEI, where rental housing is in short supply. The circumstances behind its crisis mirror those of distressed markets such as Toronto and Vancouver: Years of lacklustre rental construction, combined with rapid population growth, led to a steep decline in vacancies.
In PEI, the transition was especially swift and severe. The apartment vacancy rate plunged from a lofty 7.1 per cent in 2013 to 0.3 per cent in 2018. For three-bedroom units, nothing was available.
Of late, there’s been a hint of progress. The apartment vacancy rate improved to 1.2 per cent in 2019, according to recent Canada Mortgage and Housing Corp. figures.
Even then, PEI remains the worst province for rental availability, highlighting the challenge ahead as policy makers devote millions in new money to helping alleviate the crisis.
“Are we moving in the right direction? Absolutely,” said Ernie Hudson, Minister of Social Development and Housing. “Are we at the point that we want to be at? No, there is more work to do.”
Rental demand picked up speed under the previous provincial government, experts say. With PEI aging quickly, much like the rest of Atlantic Canada, the governing Liberals made population growth a central tenet of their economic plan, tapping into higher allotments of skilled immigrants to thwart, or at least slow, a demographic crisis.
For a province of slightly less than 145,000 people at the end of 2015, a big impact took little time to materialize. Over the past four years, PEI’s population has increased by 9 per cent (about 13,000), easily highest among the provinces, and well above 5.5-per-cent growth for Canada as a whole.
“PEI is such an anomaly, in terms of being a small market, that it can shift in any direction very rapidly based on an influx or an outflow of population, government policy changes, you name it,” said Chris Janes, senior analyst at CMHC.
Meanwhile, rental construction was anemic. Between 2000 and 2017, an average of 151 rental units were completed per year, with considerably more emphasis on building single, detached homes. That’s hardly surprising, given that modest home prices made ownership a realistic option for many residents.
“I bought my house five years ago, and I had options for under $150,000,” said Aimee Power of PEI Fight for Affordable Housing, an advocacy group.
More recently, PEI’s housing market has ignited. The median sale price for a detached home hit $260,000 in the fourth quarter of 2019, up 35 per cent from a year earlier, according to the Canadian Real Estate Association. That was a new record.
With ownership more expensive, renters snapped up available units, and price hikes often outpace wage gains. While the average monthly rent was $900 last year – the province has rent-control rules that cap annual increases for occupied units – new listings can easily command double that amount, putting a strain on finances.
Hannah Bell, an MLA for the provincial Green Party, said she knows an employed woman who was living out of her car before moving into an emergency shelter when temperatures dropped.
“She’s going to work every day; she just can’t find anywhere to live that she can afford,” Ms. Bell said. “On a minimum wage, you can’t rent in our market.”
The government has unveiled measures aimed at improving the situation. Last fall, the province’s capital budget included $17.5-million to build 100 publicly owned affordable housing units. The minority Progressive Conservative government has also tripled its funding of rental supplements to financially challenged households, to $6-million annually. About 1,000 households now receive rental support, Mr. Hudson said.
Further, the government started a program in October that offers forgivable loans of $45,000 for every unit of affordable housing that gets built, subject to approval. To date, one development has been announced, for six units in Summerside.
Private developers have proven nimble, data suggest. There were 615 rental unit starts in 2019, according to CMHC, a record high and nearly triple the previous 10-year average. For the first time in years, local builders are putting more focus on rental units than detached housing.
“A lot of these builders may have never built a multi-unit apartment, but they’re quickly finding out how to do it and doing it successfully,” Mr. Janes said.
Rental demand should remain strong, reinforcing the need for greater supply. Over the coming year, Mr. Hudson expects the province’s population to increase by another 3,000 people, give or take.
But given how developers have responded, CMHC’s Mr. Janes expects the rental market to eventually show more balanced conditions.
“Right now, if the current build rate continues at what it is, I think we’d expect to see some normalization within the next two to three years,” he said.