The $100,000 Wall
Mark Leger is the editor of Huddle. The Saturday Huddle is a weekly column that features opinion, analysis and reflections on Huddle stories, podcasts and business news in the region. It’s published first as a Saturday morning newsletter – sign up and receive our free daily newsletter too.
We came to call it the “$100,000 wall.”
In 2006, I was living in a three-unit building in the south end of Saint John. Janet and I were getting married that summer and I was planning to move into her house a few blocks away. My landlord offered us the opportunity to buy the building I was living in, and we decided it was a good investment. We went ahead with the purchase even though we knew about a mysterious bulging section of a brick wall on the side of the building.
It turned out to be severe water damage that could only be properly addressed by tearing down most of the three-storey wall and rebuilding it, brick by brick. We sold the building more than a decade later and didn’t come close to recovering the investment we made to ensure the structural integrity of that building. The rents were relatively low because the city had a high vacancy rate at the time, so we could barely cover the operating costs, let alone pay down the debt from repairing and rebuilding the wall.
It was an early lesson for me, who had only been a renter to that point, about the responsibilities and risks of ownership. We never went into the business of being fulltime landlords, though we still own another city centre rental property. But I developed an appreciation for property development and management as a business, and it informs how I view the rental landscape in the region as tenants face rising rents they say they can’t afford.
That doesn’t mean I don’t sympathize with the plight of renters. In the last year, Huddle has covered some of the absurd rent increases tenants are being asked to pay, beginning with a story last October about Gracie Fogarty, a Halifax woman who was facing a $650 monthly increase, nearly doubling the rent she paid at the time. Just last week, Huddle published a story about a Saint John woman facing a $950 increase.
A month after reporter Derek Montague spoke with Gracie, Nova Scotia announced a cap of two percent on rental increases. But the new policy was temporary and only meant to help people get through the pandemic. It’s set to expire in February of 2022 and the new Tory government says it won’t extend it or make it permanent, leading to protests like the one that happened in downtown Halifax this week.
New Brunswick has rejected even temporary rent control measures. The government did order a policy review earlier this year, but the subsequent report recommended against capping increases.
Earlier this year, I wrote a column in support of rent control, comparing it to the importance of having regular and generous increases to the minimum wage. People deserve predictable and fair increases to their wages and rents. We need some form of rent control, or other public policy interventions, to address the outrageous increases some landlords are demanding, and the relatively steep overall increases we’ve seen in the region over the last year. Statistics Canada recently released data that showed a year-over-year rental price increase of 7.5 percent in Nova Scotia in August and 8.7 percent in New Brunswick.
That said, the solutions and compromises need to account for economic realities. Developers need to meet increasing demands for housing in the region while realizing a return on their investments. The capital costs of new builds and the renovation and ongoing maintenance costs of existing properties are significant, as we found out firsthand. We can always find examples of the outrageous and unfair increases, some of which Huddle has documented, but most of the increases are simply due to increased demand and the higher costs of doing business.
Ultimately, private-sector developers operate for-profit businesses. They’re taking risks and incurring huge costs in the hopes of building equity and making profits that support ongoing and growing enterprises that employ people and provide tax revenue for government services. We can’t realistically expect this class of entrepreneurs will voluntarily keep rental prices artificially low.
I recently had a long chat with former Radian6 CEO Marcel LeBrun, a social entrepreneur who has announced plans to build 96 affordable “tiny homes” in Fredericton. In addition to housing subsidized by the province’s rent supplement program, the development will have a social enterprise centre that will include a cafe, retail shop, offices and community spaces. Residents will have access to drug treatment programs, job skills and entrepreneurial training programs and counselling support services.
LeBrun says marginalized, low-income earners need “dignity, community and opportunity” and that his tiny home community represents an opportunity to address all those issues.
“It’s the most dignified model,” LeBrun told me. “I’ve got my own four walls, my own lock and key, my own lawn, my own private space, but I also have community because I have all of this shared green space with me and my neighbours. And then I have opportunity, which is the social enterprise centre because I can learn skills, I can be in a patient work environment to achieve my goals.”
LeBrun’s project is focused on the homeless and people in unstable living situations. But our conversation, which you can listen to on the next episode of the Huddle “Home Office” podcast, touches on housing issues generally, and the challenges people are facing with increased rents across the region.
He thinks the best solutions will come from non-profit organizations, not the private sector.
“We talk about what’s the purpose of business. Is it to generate profit or improve the state of the world? More and more businesses are seeing that they have a mandate that’s bigger than just making profits. Having said that, in real estate, it seems like that’s what’s driving things,” says LeBrun.
“But there are some models that are emerging that are trying to be a little more affordable by design. I really think that special-purpose organizations that are not for profit are really the way to address it because you’re going to get more than just a house.”
For LeBrun, it’s about creating community too, not just providing low-cost housing.
Earlier this week, new Huddle reporter Sam Macdonald did a story on a 56-unit affordable housing project in Saint John that has been approved by the city’s planning advisory committee. It will have a daycare centre on the first floor and a playground outside. Like LeBrun’s tiny homes project, the intention is to create a sense of community as well as an affordable place to live.
“We’re not into making big money – we’re here to provide much-needed housing for all walks of life,” says Kevin McDonald, board chair with Steepleview Developments.
So much comes down to intention and we need more developers, private sector and non-profit, focused on housing affordability.
Our motivations were mixed when we bought our south-end property 15 years ago. I had lived in all three units and had a strong emotional attachment to the building and the surrounding neighbourhood. We also thought it would be a good investment, which it would have been if it weren’t for that wall.
Search for “Huddle Home Office” on a podcast platform like Apple and Spotify and listen to the episode featuring Marcel LeBrun, which will be released next week. You can also follow the show there and listen to past episodes featuring Maritime business leaders like Bryana Ganong and Frank McKenna.
Banner image: Mark Leger/Huddle.