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 large drop in PEI’s apartment vacancy rate is concerning but not surprising, says provincial Housing Minister Matthew MacKay.

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

“I knew these numbers were going to be where they were, so I wasn’t surprised at all,” MacKay said, referring to the island’s population growth, and in particular the number of people moving to Prince Edward Island from other provinces about the course of the COVID-19 pandemic.

“It’s not something we’ve been waiting for,” he said. “We knew these numbers were going to be there.”

At the center of PEI’s housing crisis is a population that is growing faster than planned and a construction industry that cannot keep up with the need for new housing.

The province responded by offering developers loans with a two percent interest rate, and is working to create hundreds of new apartments using modular buildings that can be assembled quickly. An example is already in place at 203 Fitzroy St in Charlottetown.

PEI Housing Minister Matthew MacKay, MP Sean Casey, CMHA Executive Director Shelley Muzika and CMHA PEI Treasurer Jamie Arsenault stand outside 203 Fitzroy St in this file photo. The modular building houses 28 new residential units. (Steve Bruce/CBC)

The latter project has a budget to build 456 units of its own in the next 18 months.

“You’re going to start seeing a significant amount of construction once the snow is gone and the permits are improved and so forth with the initiatives that we’re doing. I’m pretty confident that you’re going to see those numbers change.” MacKay said.

He did add that it will take time.

This should have been addressed ages ago. I am now the person in the chair who has the helm of the ship and it is 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.

“This should have been addressed ages ago. I’m now the person in the chair who has the helm of the ship and it’s going to be a challenge. But I’m pretty confident with all the initiatives we have going on. .”

The new building plans should lead to an increase in the apartment vacancy rate next year, MacKay said. He wants to reach a target of four percent vacancy within a few years.

“It’s not something we’ve been waiting for. We knew these numbers were going to be there,’ says Matthew MacKay, provincial housing minister. (CBC)

MacKay estimates that the province currently lacks around 1,500 units. The government took steps to address this shortfall in the fall capital budget, he said, but it will take time for those new programs to have an impact.

Avoid spreading

That shortfall of 1,500 units is a conservative estimate of the housing 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 should probably see somewhere between, at a minimum, 1,800 units per year, but much closer to 2,200, depending on more realistic population growth and household scenarios,” Pelletier said.

It’s not just how much, 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 will see more strip development, more sprawl and loss of agricultural land,” Sen.

“We lost 39 hectares [16 hectares] average between 2016 and 2021.”

Satyajit Sen, a policy researcher based in Charlottetown, says there is a housing crisis on PEI that will continue to grow if policies are not designed to address it. (Steve Bruce/CBC)

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

A new plan

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

The goal of that plan was to grow the population in order to outpace the expectation that PEI’s average age would rise as Baby Boomers age, causing labor shortages. However, the plan was more successful than imagined, with the population growing at more than double the planned rate.

A big cause of that was the pandemic, MacKay said, with thousands of unexpected interprovincial migrants arriving on the island. Some came because it was considered a safer place than Canada’s big cities, and others because their employers began to allow remote work, making relocation possible.

Thom Davidoff of the University of British Columbia says higher inflation means an area needs higher rent levels to make building new units profitable for builders. (CBC)

Prof. Thom Davidoff, director of the UBC Center for Urban Economics and Real Estate, said that particular change leveled the real estate playing field somewhat in Canada – and not to Prince Edward Island’s advantage.

“If you’re free to migrate anywhere in Canada, the housing crisis has to be, sort of, equally bad everywhere in Canada,” Davidoff said. “We’ve been so far from equally bad housing crises, it makes sense that migration patterns would tend to equalize the pain.”

Many 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 back into this hole about our housing situation,” MacKay said.

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

“I don’t think we should necessarily cut off our economic potential by reducing our intake of new residents just because housing isn’t keeping up,” he said.

“Newcomers are not to blame for PEI’s housing crisis. They are not to blame for Canada’s housing crisis, and they should be part of the solution rather than being singled out as the problem.”

‘You need a higher rent level to trigger construction’

It’s not too surprising, Davidoff said, that PEI completed fewer housing units last year than in 2021.

All things being equal in current market conditions, he would expect this trend to continue.

“There will definitely be less construction this year than there would have been otherwise because of high inflation and high interest rates,” Davidoff said.

“In terms of new supply coming in, that’s true [that] in times of higher inflation you need a higher rent level to trigger construction.”

Rents rose faster than the overall inflation rate, rising 9.0 percent from December to December, while the overall inflation rate was 7.7 percent. MacKay said the province’s two per cent loan program should help with that and reduce the cost for developers to build.

And there is more to come.

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