Halifax’s Vacancy Rate Doubles, But Rental Squeeze Will Likely Persist
HALIFAX—Halifax’s rental vacancy rate ticked up in 2020. The 0.9 percent increase in available units reversed a years-long trend that had driven vacancy rates to 1 percent in 2019.
The city’s rock-bottom vacancy rate has been fuelling rent increases across the HRM, and the Canadian Mortgage and Housing Corporation says 2020 doesn’t necessarily indicate a change in that trend.
According to the CMHC, Halifax’s rental vacancy rate jumped to 1.9 percent in 2020, while the average rent rose 4.1 percent, to $1,170 a month.
Kelvin Ndoro is a senior market economist at the CMHC. Unsurprisingly, he attributes rising vacancy rates to the Covid-19 pandemic.
Far fewer students came to Halifax to study this year as full-time enrollment in the city’s universities dropped and some chose to study remotely. International migration into the province for other reasons was also down significantly thanks to the pandemic.
Why did average rent go up?
While 2020’s jump in vacancy rates is easily explained, the rising cost of rent is more complicated.
Usually, more available apartments should drive down the price of rent in a city: extra choice means landlords have to price their units better to attract tenants.
But the average rent in Halifax still rose last year. Ndoro says there are likely a few reasons for this anomaly.
First, he says, is a kind of lag time between what is happening in the market and what people think is happening in the market.
Or, as Ndoro puts it, “the signal for increased vacancies reaches the property owners before it reaches the renters.”
If you’re a renter and your landlord approaches you with a standard rent increase, “you’re probably more likely to accept that increase, right? Because you think the rental market is very tight,” Ndoro says.
But last year the market got better for renters. If had you gone apartment hunting you could have found a vacant unit at a better price.
Ndoro says this shows through in CMHC’s data. In 2019, the average asking rent for empty units was higher than those with people living in them. In 2020 the opposite was true: the average rent for empty units was lower than occupied ones.
Ndoro thinks there were other factors contributing to rising rents as well.
He says renters were probably more likely to stay put and accept rent increases in their current homes because moving was more challenging during the Covid-19 pandemic.
He also believes government supports like the CERB played a role. Anecdotally, landlords told the CMHC they had an easier time collecting rent this year because people had a guaranteed source of income from the government.
Migration will continue to drive rental squeeze
Migration into Nova Scotia has taken off over the last five years. Most new arrivals move to Halifax, putting the squeeze on the city’s rental market.
In 2020, Covid-19 dampened migration, but not by much.
“The drop in migration we saw in Halifax in 2020 still left us with the second highest level of migration to the city in the last five years,” Ndoro points out.
With so many people still moving to the city, Ndoro says rent will continue to go up unless construction keeps pace.
“What we really need to be focusing on is increasing supply. Because when there’s increasing supply, eventually, competition will drive prices down. That is the sure way of doing it,” he says.
Right now, the level of construction in Halifax “is the highest we’ve ever seen.” Almost 5,000 new units are scheduled to finish in the city soon. But Ndoro says that record-breaking construction might not be enough.
“There is supply in the pipeline, but our population keeps growing, so I’ll stop short of saying that what’s in the pipeline is adequate. We probably need more construction to start, in addition to what’s already underway,” he says.
He points to the fact that 2020’s 1.9 percent vacancy rate is still the seond worst of Canada’s major cities, behind only Gatineau, Quebec. It’s also far lower than Halifax’s historical average, which is 3.8 percent.
Trevor Nichols is a staff writer with Huddle in Halifax. Send him an e-mail with your story suggestions: [email protected].