Despite the undeniably high demand for purpose-built rental (PBR) housing, the development of these types of buildings has been lacking in (and outside of) most large Canadian cities.
While the homeownership market (freehold and condominium housing) continues to keep crews busy, “PBR” housing remains a “someday maybe” priority for many a Town Hall/private developer; and the reality is, it’s been that way for the last 50 years.
In their recent article for The Financial Post, Murtaza Haider and Stephen Moranis point out that Halifax has been bucking the trend.
Over the past two decades, rental housing starts accounted for fewer than 10 per cent of the new construction in places like Toronto and Ottawa. Yet, Halifax has defied this trend. Rental housing construction accounts for more than half of the new housing being built in Nova Scotia’s capital. For instance, 63.4 per cent of the housing starts in Halifax during 2020 comprised rental dwellings.
Is there something in the water or, perhaps more likely, the regulatory framework, that allows Halifax to build rental housing when larger cities have struggled to do the same?
Now, before we get hate mail (although…it might still happen) reminding us of the incredible housing shortage in the city we want to say:
Yes. Absolutely, the growing demand for rental housing (particularly affordable and attractive rental housing) continues to outpace the actual development of rental housing.
The fact remains, however, that rental housing in HRM dominates residential construction. So, what is at the root of the focus on rental development? A number of factors, but there are two that Haider and Moranis cite which certainly grabbed our attention.
Halifax’s housing initiatives deserve examination since we believe that restricting landlords to rent raises by a certain level, also known as vacancy decontrol, and the introduction of the capital gains tax have been instrumental in constraining the supply of rental housing.
John Dickie, president of the Canadian Federation of Apartment Associations, pointed out that “until recently, Nova Scotia did not have rent control at all for rental apartments.” The exception was manufactured home lots. Vacancy decontrol was only introduced as a temporary measure in response to COVID-19.
Yup, we tricked you into an article about Rent Control.
Not really though.
Housing prices have stayed relatively flat (ignoring, for the moment, the multinational swing we saw with Covid-19). Meaning the “need to own” has also remained neutral.
The demographic and economic makeup of our city has created a supportive rental market. With the modest increase in household income over time and the steady flow of students.
These reasons aren’t unique to Halifax and don’t stand alone as an explanation of the trend, however.
Other small to medium-sized cities have similar socio-demographic trends, so Halifax’s circumstances are not unique. But even though it might not be unique in consumer demographics, its development community boasts specific characteristics. For example, our conversations with planning experts revealed that builders of Greek and Lebanese origin actively building in the Halifax area prefer to develop and hold those properties rather than sell them as condominium builders do.
This isn’t a new phenomenon. This has been a prefered business model for years and has lead to multi generational wealth and success in our city.
Large real estate invenstors have taken notice (and root), making rental housing stock in HRM even more desirable.
Canadian Apartment Properties REIT (CAPREIT) in February 2020 announced the acquisition of eight apartment buildings in Halifax that added 1,503 rental dwellings to its local portfolio, which now comprises some 3,100 rental suites. With an average occupancy rate north of 99 per cent in the eight buildings, CAPREIT has been capitalizing on the strong demand for rental housing.
As we’ve alluded to multiple times throughout this article, the changes that we see as a result of Covid-19 are likely to have a major impact on housings markets throughout North America, including here in Halifax. There are important leasons that can be learned from the market growth over the past few years, and they can be applied more broadly to increase and support the development of much needed rental housing.
Halifax’s success with rental housing construction demonstrates how public and private entities may collaborate to build sufficient rental housing in places where the demand for rental housing is high. An absence of rent controls in the past, supportive socio-demographics, and imaginative homebuilders and rental investors have been critical to resolving the rental housing challenges.
To learn more and take a look at the full report we recomend checking out the full article from Murtaza Haider and Stephen Moranis here or visiting thier fantastic site at https://hmbulletin.com/
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website,www.hmbulletin.com.