Jordan: When I start this podcast, and I have before talking about a massive housing crisis in Canada, I know what you’re thinking. You’re thinking about dozens of massive condos dotting the Toronto skyline and more joining them every day. Yet somehow there’s still not enough affordable units to keep people off the streets. Or perhaps you’re thinking about detached Vancouver houses, the kind that once would have been home to middle class families, but now start at 2 million bucks and up. If you think of either of those things, that’s fair. Both cities are facing a crisis. Too many people, not enough places, demand driving prices through the roof. But it’s not just them. The last time you thought about Prince Edward Island was probably when you were thinking about a scenic vacation, or maybe you were dreaming of getting away from it all, moving out of the big city and settling down somewhere calm with lots of countryside and room to grow. Well, I’m sorry. It’s not happening here. Canada’s worst housing crisis is happening now in its smallest province. And while you might be able to book yourself and Airbnb for a quick visit, you can count the number of family apartments available for rent in Charlottetown, basically on one hand. And you probably can’t afford them either. So what exactly is happening in PEI. I’m Jordan Heath Rawlings. This is The Big Story. Matt Lundy is an economic reporter with the Globe and Mail in Toronto. Hi, Matt.
Matt: Thanks for having me.
Jordan: Oh, it’s no problem. You’ve got, uh, an unusual, a little corner of the Canadian housing market you looked into.
Matt: Yeah, absolutely. I’m recently wrote on PEIs rental market. Not the type of thing you think about all that often, uh, being out here in Toronto or whether you’re in Vancouver or Montreal, but it’s a, uh, it’s a, a pretty wild place, I would say.
Jordan: So tell me about even just one of the typical kind of stories you hear from renters in PEI.
Matt: Right. So I’ve heard quite a bit from families out in PEI, and they’ve been having a ton of trouble for a few years now. Uh, it’s a really tight rental market. Not a lot of spaces, particularly larger spaces, like if you need three bedrooms and up, let’s say. And they, they really just can’t find very much at all. Uh, so you see on Facebook all the time, families pleading, uh, for any sort of tips on vacant units, they find themselves weeks away from homelessness. Uh, they call apartment buildings month after month looking for something, and invariably they hear that there’s just nothing available.
Jordan: Can you give me some context, uh, just in terms of like how tough has it there in terms of vacancy rate and how difficult it is to get into these places? Do we have numbers?
Matt: Yeah, absolutely. So if you go all the way back to 2013 the apartment vacancy rate was about 7%. That’s pretty high. It’s, you know, the type of rate where if you need a place, there’s going to be some options for you. Fast forward five years to 2018 and it was 0.3%. So like nothing, pretty much, nothing. Like there was literally nothing for a three bedroom, uh, PEIs at small enough place that you can count the vacant units pretty quickly. So circa 2018, uh, given all the apartments that they have, that means there were 18 available apartments on the whole Island. So I mean, things improved a little bit in 2019 you know, up to 1.2% vacancy, but it’s still the lowest on a provincial basis. It’s still a really tight market. There’s just not a lot available.
Jordan: I mean, the thing that really grabbed me about this is that those are numbers, uh, worse than, or even maybe now on par with, you know, the numbers we hear out of Toronto and Vancouver where these were the biggest housing crises in Canada. And how do people react? I mean, you’re based in Toronto, when you put together a piece explaining that, no, actually the worst housing crisis in Canada is out East in Prince Edward Island.
Matt: I think it’s mostly a surprise. Yeah. Uh, you know, and when you’re based out in these cities, you tend to think, you know, this is where everyone wants to live in Canada. Therefore, there’s a ton of competition. But in fact, I mean, there’s, there’s a lot that’s going on beneath the surface and PEI that’s driving this. And, and when people hear about it, you know, from here, we just think PEI, that’s a place where you go on vacation or something. But, you know, there’s a lot of people living and working there and it’s, it’s really tough. And people, uh, they don’t realize it mostly.
Jordan: What are those underlying things that are driving, uh, the scarcity of rental units?
Matt: One big thing is population growth. PEI has grown a tremendous amount over the past, you know, say four or five years. On top of that, there’s just not been a lot of apartments built. I mean, PEI, compared with, say, here in Toronto where we’re sitting, uh, the real estate market is, uh, you know, the prices are a little more modest, let’s say. So, you know, years ago you’d have a lot of options for detached housing under, say, $150,000.
Jordan: Uh, so first of all, wow.
Matt: Yes, exactly. Uh, so, you know, developers, they’re there. They weren’t really building apartments because you know, someone with a middle class income housing was pretty affordable for, for ownership. So that made sense. But then you get years of not really building apartments. An influx of a ton of people. And home prices have gone up quite a bit, you know, for detached housing, typical detached housing went up 40% over the past year. So now what used to be affordable isn’t for a lot of people, they need to rent and they haven’t been building rentals.
Jordan: So start with the first problem. Um, and I guess it’s a really good problem for a place like PEI to have. Where did the growth in population come from?
Matt: Right, so, uh, the previous Liberal government there made population growth a key part of their economic plan. And really that’s, that’s a good thing. You know, when you’re looking at any of the Atlanta provinces, they’re really old. They need to get younger. They need people, you know, in a place like Newfoundland, their population is decreasing. Uh, they desperately need people. PEI saw this and they said, we got a ramp up these numbers. So they started bringing in a lot of people. There were entrepreneurship programs to bring in people from outside of Canada, they’re trying to lure native Islanders back to PEI as well. So you know, the numbers sound almost kind of funny. Over the past 4 years, PEIs population has increased by 13,000 so that’s just like a fraction of what you would get in a given year in say the GTA or something, but 13,000 that’s 9% increase over four years. It’s nearly double the national rate of growth. It’s the highest growth of, uh, of any province over that span. So, you know, 13,000 is a big deal on an Island of, you know, give or take 150,000.
Jordan: That’s, I mean, a rough equivalent of that in Toronto would be what, like 300- 350,000 people for that span?
Matt: Yeah. Just, uh, you know, if you were to blow it up Toronto wise, I mean, it would just be, we wouldn’t know what to do with all those.
Jordan: And what about the second challenge? I mean you mentioned that, uh, now that houses are more expensive, some people are being forced to rent. Where’s the new inventory coming from? Cause again, you think about how the bigger cities solve these problems. Like, Toronto can throw up six new condo towers, right? The developers are all over it. How does that work on an Island with limited resources, but also just like, space?
Matt: Yeah, there are definitely, you know, the government has responded, there are more affordable units that are starting to come to market. They’re throwing millions of dollars at this, but a lot of what we’re seeing that’s coming on, lot of developed developers, they’re starting to react. They’re saying, Oh, we need, there’s a huge potential here for rentals. We need rentals. But a lot of those are going to be at market rates. Right. So. PEI, like a lot of, um, lot of provinces has rent control, which for tenants is great because you know, more or less that your rent increases year to year are going to be pretty limited, let’s say around inflation, 2% or so. But when a unit is vacated or a new unit comes onto the market, uh, the landlords can set it where they want, right? So the new listings that are getting come available and a lot is going to be a market rate, those are going to be at pretty high rates. So, you know, the average rent in PEI is somewhat modest. It’s like, you know, $900 but that includes people who’ve been under rent control. Let’s say they’ve rented an apartment for 20 years or something on the Island, but the new stuff you see, you know, $1500, $1700, $1800 for pretty modest accommodations.
Jordan: So when you talk to people there, either people who are trying to rent or just people who’ve lived there for quite some time, where are they feeling the squeeze and what do they think the government should be doing?
Matt: One thing that you hear a lot from people there, there are squeezes in a few different directions. One is that I’m seeing just tons of families that are unable to find the space. So families of five that are crowding into two bedrooms. As I mentioned earlier, for three bedroom vacancies a couple of years ago, there was literally nothing available. So finding the space for families is, has been a real challenge. Another one that I’ve heard about quite a bit is for students. For UPEI, about 90% of their housing is off campus. They only have a few hundred beds on campus. But what I’ve been hearing from students is that they’re competing with the short term rental market a lot. So sites like Airbnb. The tourist season is still going in September when school starts. So a lot of students are having to double up with other people who happen to have apartments, wait out the tourism season, then get a rental for October. So there’s quite a bit of precariousness that you’re seeing at the start of the school year. Yeah. The Airbnb thing, a lot of people mentioned that.
Jordan: I mean, that was going to be my question too, is like, PEI to most of Canada is a tourism destination, and I know in bigger cities, uh, we’ve seen apartments sitting empty, calling them ghost hotels, et cetera. And that happens, I guess even, uh, even on the Island.
Matt: Yeah. I mean, anecdotally, I’ve heard that, you know, even with a detached house costing $260,000. It’s a lot for people out there, but you know, if you’ve got a fair bit of money from another city from outside and you want to turn that into a short term rental, that’s still relatively affordable and you can do that and you’re taking potentially some supply off the market there as well. If you go on Airbnb and type PEI in, you’re going to find hundreds and hundreds of listings. Airbnb is huge there. Charlottetown right now is sort of in the midst of coming up with their draft guidelines on how to regulate the short term rental market. So we’re going to see, you know, depending on what they’d come up with, you might see a return of some units back onto the rental market.
Jordan: Why don’t we talk, I mean, you mentioned that people are surprised to learn this, but why don’t we talk about this kind of housing crisis the same way we do Toronto and Vancouver? Is it just a matter of like raw numbers? Because even if the vacancy rate is so low, you know, you can, like you said, you can count the apartments.
Matt: Yeah. I think if you’ve been in a big city a while, particularly one like Toronto or Vancouver where they have big rental housing problems, you tend to think the solution to the problem is moving elsewhere. That it’s just more affordable. You might have to deal with the commute or something, but it’s better elsewhere than it is here. Fact is, if you look at some of the numbers for these smaller markets, you’ll find places like Colona, BC, Vernon, BC, you know, even smaller places like Tofino or Revelstoke where they’re really struggling to house residents, to house seasonal workers in PEI definitely falls into that camp where they have really acute housing pressures.
Jordan: What kind of pressure does simply being an island put on this problem? Because, you know, and in Toronto, if you want to stay in the GTA or if you wanna stay in the Vancouver area and work there, but you can’t afford it, you move further and further and further out. You can’t do that sprawl on PEI.
Matt: Yeah. I mean, I think that is one factor, but you know what, I’ve sensed a frustration from people there that they’re saying, you know, I don’t, I don’t care if I’m on the Island, I’m going to go somewhere else. You know, there’s one case of a guy I was speaking with recently, his home is being demolished. Uh, his apartment so that they can build a bigger apartment there. So the irony is that in order to increase their supply, they’re actually going to, you know, basically kick a bunch of people out and they’re going to have to find something. This is a young guy who is university educated. Exactly the type of person that PEI wants to hold on to, probably in his twenties. Uh, but he’s, he’s gonna look elsewhere. He’s gonna leave the province because it’s just, you know, I hear a lot of people, they say they look over at Moncton, it’s not that far away. And they say, well, for cheaper I can get a two or three bedroom house, let alone, you know, I’ve got this crummy basement apartment. So while, you know, there are definitely geographic constraints there, a lot of people are looking at other provinces and saying, you know what? It’s easier.
Jordan: Is there a sense in the government, either I guess from the government or the opposition that maybe they pushed too hard to grow the province too quickly? I mean, if, as you mentioned, folks like this guy are now leaving.
Matt: So, uh, I was speaking with the minister in charge of housing and he said population growth has been great for the economy. There’s been huge employment growth in PEI over the past year. Economy’s growing. Uh, I think there’s a sense that this is an unfortunate byproduct of what they needed to do economically, and they’re going to be putting some more resources into it right now. I mean, over the coming year, they’re expecting the population to grow by another 3000. So, you know, it’s, you know–
Jordan: How many units are coming online this year? Do we have any idea of the inventory, like the, the raw inventory coming?
Matt: Uh, so I know that there were, you know, just over 600 rental units starts last year. Not sure how long all of those will take to get to market, but you know, if you’re looking at the math, you know, 600 for you know, that doesn’t count some of the affordable housing units. But, you know, 600 for 3000 maybe not great math, but they expect it could be a few years more before you know, things kind of get to normal.
Jordan: As an economics reporter, what are some of the things that you can look at kind of on a more granular level in places like PEI or even some of the other smaller communities you mentioned that you can’t get into when you look at this problem in a bigger city?
Matt: Well, I think one thing that’s definitely a little easier when you get granular with this stuff is, you know, you talk about these things like supply and demand, when it’s really difficult to grasp those things when you’re looking at a really big market like Toronto or Vancouver, but when it’s PEI and you can literally count the vacant units, these things really spring to life and where you know that, Oh, they just signed an affordable housing plan for 10 units in one city. You know, that that’s actually going to make an appreciable impact. Uh, you know, silly as it seems for 10 units. So all these things kind of spread, uh, you know, spring to life in a way that they might not otherwise when you’re dealing with a bigger market.
Jordan: Are there any lessons that you’ve seen from how PEI is handling this that might scale up to bigger markets?
Matt: It’s an interesting question. There’s definitely been a pretty swift reaction. Uh, from the government, not as swift as some people would like. Definitely. But you know, the last fall, the capital budget had, you know, around $24 million for housing construction. This was not part of their budget before. So they’re building some affordable units. There’s loan programs to encourage, uh, affordable development as well. They’ve tripled the amount of money that they’re giving out in rental subsidies to people. Uh, about a thousand households on the island are getting rent support from the government. I’m not sure how this necessarily scales, uh, because 24 million in PEI, that’s going to have to scale up to quite a large amount for Toronto, but I think we’re going to see very quickly, potentially some results there. PEI’s a small enough place that the money that they’re putting forward for this could potentially make a pretty quick impact and it could serve as a pretty good case study for other cities.
Jordan: Speaking of that, do we have like a timetable for when we should start to see this problem get under control, if what the government’s doing is working?
Matt: So, and people that I spoke with, they think that it’s going to take several more years. So if you’re talking about a vacancy rate of 1.2% right now. There’s no real consensus on what’s quote unquote healthy. A lot of people would say 3% is sort of in the realm of what’s okay, three plus, given what they’re building right now, some people think that it could be, you know, three years before things become normal. But you never know, right? You know, there’s quite a bit of paperwork involved in getting some of these affordable units off the ground cause they rely on, you know, you’re going through the government on this stuff. Uh, and at the same time, PEI’s, you know, certain people in PEI anyway are very happy with the population growth that they’re seeing. It doesn’t seem like it’s going to be slowing down in a really big sense. They want to keep going with that. So we are going to see potentially some of those pressures keep up for a while.
Jordan: Is there a tipping point there where you have a danger of a lot of people living precariously? Like, are people living out of their cars the way we’ve seen in some of the bigger cities?
Matt: Yeah. Uh, absolutely. There are, um, you know, one thing that the government has been doing for at least a couple of years there is renting out off-season motels. A lot of these places that, you know, are open in the summer months. They’re more or less closed down, uh, in the winter. But the government’s been saying, you gotta rent these out for families that are in precarious situations, and that’s where a bunch of people who’ve been living in the winters.
Jordan: Thanks for talking us through this.
Matt: Thank you.
Jordan: Matt Lundy of the Globe and Mail. That was The Big Story. If you would like more, we’ve talked about the housing crisis in many places at thebigstorypodcast.ca. You can tell us about your problems finding a place to live at @thebigstoryfpn. You can find more podcasts besides this one at frequencypodcastnetwork.com. And you can find them all this one, many others in your favorite podcast app. You can rate us, you can review us, you can give us five stars and we’ll appreciate it wherever you get your podcasts. Thanks for listening. I’m Jordan Heath Rawlings. We’ll talk tomorrow.
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