Halifax rental crunch

Photo: Bruce Murray/VisionFire Studios

By Kim Hart Macneill 30 October 2019 Share this story

More people, higher rent, and fewer apartments put renters in a difficult position

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Her optimism didn’t last.

Five people clustered in the entryway leading into the kitchen, which was so small that it featured a table that folds down from the wall. It was also full of people. Off the kitchen was a bedroom and en suite bathroom, both of which featured more potential renters. “You could move around,” she says, “but barely. It was tight.”

The ceramic tile in the kitchen was cracked to the point where it looked like a tripping hazard, and the lack of living room left Jones wondering what to do with her sofa. She left after a few minutes, unwilling to fight for the apartment or any space within it.

“It really showed me the competition I was up against to find a place and that really raised my stress level,” she says.

It took six months, nearly 20 viewings, and countless unanswered Kijiji replies before she finally found an apartment through a friend, who learned about it before it went on the market. Luckily, she was staying with family and not counting down the end of a lease. In July, she moved into her $850 (plus utilities) apartment near the Northwest Arm.

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Jones’ story isn’t unique. Last fall, the Canadian Mortgage and Housing Corporation (CMHC) announced HRM’s vacancy rate was 1.6%, meaning only 1.6% of all rentals were vacant. That’s the lowest number since CMHC started measuring in 1989.

If you’ve consumed any local media during the summer, you likely think short-term rentals (websites like Airbnb, Home Away, and VRBO) are to blame. Short-term rentals grew 31% in HRM between 2016 and 2019, to offer over 2,100 accommodations in HRM, according to AirDNA, a company that collects and aggregates information from short-term rentals sites.

Short-term rentals are part of the story, but not the whole story, says Neil Lovitt, senior manager of planning and economic intelligence with real-estate consulting firm Turner Drake & Partners Ltd.

The topic excites Lovitt. When we meet in his office, one large desk monitor is covered in colourful bar graphs tracking rental increases, new builds, population growth, and other figures.

Before we dig into Lovitt’s numbers, it’s important to understand what Halifax’s rental market looks like right now. CMHC released its latest local “Housing Market Insight” report in June.

It shows 40% of all households in the Halifax CMA are rentals. It’s 50% in parts of the city like Peninsula South (encompassing everything from Cornwallis, Cunard, Robie streets, along Quinpool Road to Connaught Avenue; north of Connaught to Chebucto Road and the Northwest Arm).

Peninsula South renters are 50% non-permanent residents, 39% age 15–24, and 53% single-person households. Their median monthly income is $1,917. The average monthly rent for a bachelor apartment is $880, $1,095 for a one-bedroom apartment. The area is home to half of all HRM bachelor apartments, and 25% of one-bedrooms.

That means those living in bachelors allocate about 45% of their income to rent, or 57% for a one bedroom. Financial advisors say you should spend about 30% of your pre-tax income on housing. That means the average lone renter should pay about $575 per month. You’re as likely to find someone paying that amount on the peninsula as you are to eat this magazine.

Stephanie Daye sees what the crunch has done to the market every time she shows an apartment. She owns five three-bedroom rental units in North Dartmouth renting for $900–$1,200 per month. “When we first moved here five years ago, it took about two or three months to find a renter,” she says. “Now it takes about two weeks.”

The increased demand is good for Daye because it means spending less time showing apartments and vetting potential renters. She offered solo showings when she started, but says that left her little time to eat and see her family.

Increased demand means she can do group showings, but even that means an hour a day of emails and calls back to potential renters, and several hours showing the apartment. Most group showings attract 12–15 people.

“[Potential renters] are not hesitating,” she says. “In the past, people would say, ‘I’m looking at another place but I’m interested. Let me double back with you in a couple of days.’ That doesn’t happen anymore. People say, ‘Here’s all my information.’” Most email Daye their applications within 24 hours. “Or they’ll say right away, ‘I really want this place, what can I do to get this place right now?’”

Neil Lovitt. Photo: Bruce Murray/VisionFire Studios

The first key to understanding how we got here, says Lovitt, is how many new apartments are created each year. “When we talk about seeing more cranes, that because we’re building more high rise multiunit rentals. They’re more visible,” he says. But that doesn’t mean there are more apartments.

“If you were to run a 10 and 20 year average on this data, you’d find they’re more or less the same,” he says. “The long-term annual output is pretty stable. It’s roughly 2,000–2,500 units a year.”

March 2019 saw an all-time high number of units under construction (4,020 according to CMHC), but migration into the city out paces building.

Since 2016, the population grew by about 22,000 people according to the 2018 Halifax Index. In both 2017 and 2018, Halifax saw a record 2% population growth. International immigration accounts for nearly 65% of that growth.

Federal immigration policy fuels that increase. “That’s really a driver in this conversation around the rental market being really difficult, leading to price increases and challenges finding available units,” says Lovitt. “We’ve essentially had a doubling of the people coming to the city looking for housing in the last two years.”

HRM is also aging. Last year, rental households age 45–64 saw their strongest growth since 2006, up by 4,400 households, says CMHC. “Around 2012 the bleeding edge of the Baby Boomers reached the retirement years,” says Lovitt. “That demand for the high-end rental apartments is retirees looking to sell their homes for a lower-maintenance option.”

The population swell and migration of retirees from outside of the city core means there are fewer apartments up for grabs, tanking the vacancy rate. Combine that with stagnant pay for workers as rent goes up, and the problem becomes clearer.

Median monthly income in Halifax CMA was $3,533 in 2016 according to the latest census data. But the median rent for a two-bedroom apartment in 2018 was $1,065. All but three HRM submarkets (Mainland North, Dartmouth East, and Bedford) offer median rents for one- and two-bedroom apartments above the 30% affordability threshold for one-person households. Over 43% spend more than 30% of their income on shelter.

“Overall looking at the Halifax market, rent is going up about 3% year-over-year,” says Lovitt. “We’re seeing a lot of new apartment buildings. They tend to come online at a higher rate and that starts moving everything up.” As renters buy homes, or move into newly built buildings, their former landlords can raise the rent in their old apartments to meet the market.

Short-term rentals aren’t causing the rental crunch, but they play a part. Over 70%, or about 1,600, of local short-term rentals are full homes rather than hosts offering a room in their dwelling. About half of all short term rentals are one- and two-bedroom apartments.

AirDNA’s map of Halifax uses purple dots to mark Airbnb locations. Viewing a zoomed-in version of the map showing only the peninsula and downtown Dartmouth looks like a cluster of grapes. Whole streets in Halifax’s North End are completely obliterated by dots; they’re impossible to see without zooming all the way in. The farther you get from the core the more space there is between dots, but few neighbourhood are free of short-term rentals.

It’s easy to look quickly and assume that short-term rentals are eating the city’s rental stock. In reality, they number only 3% of all apartments in HRM, according to AirDNA’s July figures.

“That on the whole isn’t a market moving number,” says Lovitt, “but when we look at where they are, that’s the story. In the old North End and the Hydrostone, if you’re talking about 10 units, that can be most of a street.”

Lindell Smith, District 8 councillor, says he hears similar concerns from residents. “The issue is units in houses that are 100% short-term rentals,” he says. “There’s very little monitoring of transient folks coming into our neighbourhood. They don’t live there so they don’t care if they have a party and leave the house a mess.”

Constituents also tell Smith that when their leases end, landlords convert their apartments into short-term rentals. “Some of these landlords are doing it illegally, but there’s nothing that stops them from giving the appropriate amount of notice depending on the lease,” says Smith.
That’s what happened to Emily Brown.

In summer 2018, Brown returned from a trip to Cape Breton to a note from her landlord: “There was a letter asking me to give him a call because I had to vacate [in January]. They were turning the apartment into an Airbnb. This was after living here seven years. He just left it at my door.”

Her cozy North-End one-bedroom basement apartment cost $750 per month, including utilities. Today, the Airbnb that replaced it rents for $99 per night. AirDNA estimates the rental is booked 58% of the time and earns an average annual revenue of $10,183. That’s about $1,000 more per year than Brown paid.

Like Jones, Brown had a tough time finding a new apartment. “For the first little while the only places that were under $1,000 with nothing included were pretty sketchy,” she says. “You can tell from the photos how it smells. It was a very stressful couple of months.” Also like Jones, Brown found her new apartment through a friend living in the building.

Earlier this year, the legislature considered two bills that will change how short-term rental operators do business. The first, An Act Respecting the Registration of Tourist Accommodations passed in April, requires operators to register or face a $1,000 fine, unless they live on site. It also requires services that facilitate short-term rentals in Nova Scotia keep records of local rentals.

The second, An Act Respecting the Regulation of Short-term Rental Accommodations, passed first reading in early October. It says platform operators must pay an annual fee of $5,000 plus $1 per night booked, and verify that operators using their sites register. It also sets out the registration fee for those renting their homes on the platforms and requires them to collect and pay HST. However, this bill was introduced by the NDP and does not have government support, so is unlikely to become law.

Smith says Council is also looking at short-term rentals’ effect on the rental crunch. The immediate problem, he says, is “we have our standard zoning and compliance rules, if you’re not standard you’ll get fined, but there’s no real deterrent. The fines are not as much as they should be. We can send you a cease and desist, but while it’s going through the court system you can still be renting it out. Who knows how long that will take.” He wants to see “strict rules and hefty fines.”

One of the key goals of the Centre Plan is to add density to the urban core through high density development. Part of that, says Smith, is density bonusing: allowing developers to buy added building height exceeding the Centre Plan’s direction.

Smith suggests the money would go toward more non-profit housing and affordable housing. “That’s a small piece of the puzzle,” he says.

Earlier this year, developer Danny Chedrawe presented a challenge to HRM Council, the Province, and other developers to create more affordable housing. You likely know his name because he’s president of Westwood Development, the company behind the Ben’s Bakery development and The Doyle on Spring Garden Road.

Part of his six-building proposal for the block between Almon, St. Albans, and Robie streets includes a seven-storey, 60-unit building that would rent for 70% of market value. While the units won’t feature granite counter tops or en suite laundry, he’s still going to take a hit, even with affordable housing grants from CMHC.

“He can do it, many developers can’t,” says Smith. “There’s just not a lot of support within the Nova Scotia government to do this kind of work. That’s one building. That doesn’t really change much. I think it’s great that he’s doing that but it’s only a drop in the bucket.”

CORRECTION: Due to a fact-checking error, an earlier version of this story incorrectly indicated that An Act Respecting the Regulation of Short-term Rental Accommodations was a provincial government bill. The NDP introduced the bill, which the government doesn’t support, meaning it’s unlikely to become law. 

This story was originally published in Halifax Magazine.