P.E.I. will see more action on housing 'once the snow's gone,' says minister

A Canada Mortgage and Housing Corporation report showing a big drop in P.E.I.'s apartment vacancy rate is concerning but not surprising, says provincial Housing Minister Matthew MacKay.

The overall unit vacancy rate fell from 1.5 per cent in October 2021to 0.8 per cent this past October.

"I knew these numbers were going to be where they were, so I wasn't surprised by it at all," said MacKay, citing the Island's population growth,and particularly the number of people who moved to Prince Edward Island from other provinces over the course of the COVID-19 pandemic.

"This isn't something that we waited for," he said."We knew these numbers were going to be there."

At the centre of P.E.I.'s housing crisis are a population growing faster than planned and a construction industry that can't keep up with the need for new housing.

The province has responded by offering developers loans with a two-per-cent interest rate, and is workingto create hundreds of new apartments using modular buildings that can be put together quickly. An example is already in place at 203 Fitzroy St. in Charlottetown.

That latter project has a budgetto build 456 units of its own in the next 18 months.

"You're going to see a significant amount of building starts once the snow's gone and the permits are improved and so on with the initiatives that we're doing. I'm quite confident you're going to see those numbers change," said MacKay.

He did addthat it is going to take time.

It should have been addressed ages ago. I'm the person in the chair right now that's got the steering of the ship and it's going to be a challenge.Matthew MacKay

"This has been a problem that has been 25 years in the making and now it needs to be addressed.

"It should have been addressed ages ago. I'm the person in the chair right now that's got the steering of the ship and it's going to be a challenge. But I'm quite confident with all the initiatives that we've got going."

The new building plans should lead to the apartment vacancy rate risingnext year, MacKaysaid. He wants to reach a target four per cent vacancy rate within a couple of years.

MacKay estimates the province is currently short about 1,500 units. The government made moves to rectify this shortage in the fall capital budget, he said, but it is going to take time for those new programs to have an impact.

Avoiding sprawl

That 1,500-unit deficit isa conservative estimate of the housing that is needed, said housing policy researcher Matt Pelletier.

Pelletier and partner Satyajit Sen recently put together a budget submission for the province on the housing crisis.

"We probably need to see somewhere between, at the bare minimum, 1,800 units per year, but much more close to 2,200, depending on more realistic population growth and household scenarios," said Pelletier.

It's not just how many, but what to build, Pelletier and Sen said. The province needs to focus more on apartments and townhouses or it risks losing more farmland to housing, they said.

"In the absence of a plan, you would see more ribbon development, more sprawl, and loss of agricultural land," said Sen.

In their budget submission, Sen and Pelletier note Statistic Canada's census of agriculture shows P.E.I. lost an average of 16 hectares of farmland a day over the five-year period from 2016 to 2021.

MacKay said he has been in discussions with municipalities about creating a higher density target for residential development, meaning more multi-unit buildings and fewer single-family dwellings.

A new plan

The province is currently working on a new population blueprint after its last five-year plan expired in 2022.

The goal of that plan was to grow the population in order to get ahead of the expectation that P.E.I.'s average age would rise as Baby Boomers got older,sparkinglabour shortages. The planwas more successful than imagined, though, with the population growing at more than double the planned rate.

A big cause of that was the pandemic, said MacKay,with thousands of unexpected interprovincial migrants arriving on the Island. Some came because it was seen as a safer place than Canada's big cities, and others because their employers began to allowremote work, which made moving possible.

Prof. Thom Davidoff, director of the UBC Centre for Urban Economics and Real Estate, said that particular change leveled the real estate playing field somewhat in Canada and notto Prince Edward Island's benefit.

"If you're free to migrate anywhere in Canada, the housing crunch has to be, sort of, equally bad everywhere in Canada," said Davidoff."We were so far from equally bad housing crunches, it makes sense that migration patterns would tend to equalize the pain."

A lot of those migrants were in their 20s and 30s, which meant success on one level. The median age of Islanders has begun to decline slightly.

"We need population growth for the economy as a whole, but at the same time we need to make sure we don't fall down this hole again on our housing situation," said MacKay.

Those new residents are important for the Island economy, agreed Pelletier.

"I don't think we should be necessarily cutting off our economic potential by reducing our intake of new residents just because housing is not keeping up," he said.

"Newcomers aren't to blame for P.E.I.'s housing crisis. They're not to blame for Canada's housing crisis, and they should be part of the solution rather than being pointed out as the problem."

'You need a higher rent level to trigger construction'

It is not too surprising, said Davidoff, that P.E.I. saw fewer housing units completed last year than in 2021.

All things remaining equal in the current market conditions, he would expect that trend to continue.

"Certainly this year there will be less construction than there would have been otherwise due to high inflation and high interest rates," said Davidoff.

"In terms of new supply coming on, it is true [that]in times of higher inflation you need a higher rent level to trigger construction."

Rents have been rising faster than the overall rate of inflation, up 9.0 per cent from December to December, while the overall inflation rate was 7.7 per cent. MacKay said the province's two per cent loan program should help with that, reducing the cost for developers to build.

And there's more to come.

In the next few weeks, the minister said, there will be a number of announcements regarding new housing projects.