Unpacking the Housing Crisis in St. John’s

Here’s a rundown on how St. John’s (and Canada) found itself in a growing housing crisis—and how we can get out.

With much chatter about the challenges of finding affordable (and available) rental housing, it seems important to ground ourselves in the numbers and think about how we can reverse this worrying trend. The most recent data from CMHC’s rental market report gives us a snapshot of the situation in our rental market as of October, 2021. The data showed a slight decrease in supply in the St. John’s area (1.3 percent) paired with a rental increase of about $50 monthly. This seems marginal, but it amounts to $600 annually—at a time when the cost of everything is increasing and wages have stayed more or less static. 

On the demand side, the return of in-person classes at MUNL and greater workforce mobility due to remote work has led to a drop in vacancy rates from 7.1 percent in 2020 to 3.4 percent in 2021. While that number is still considered healthy by national standards, in our local context we have been struggling for quite some time with a mismatch between the units available and the demand for specific housing types. Our average renter household is a single individual or a couple, meaning demand is markedly higher for smaller units. However, we see supply largely concentrated in two and three bedroom units, with these making up over 60 percent of the rental market.

Furthermore, we are beginning to see the global trend of the financialization of housing having an impact on our rental market. In Newfoundland and Labrador, 52 percent of our rental units are owned by real estate investment trusts (REITs): publicly traded companies who use the acquisition of low-cost housing to grow wealth for their shareholders. The goal of these companies is to maximize profit. The financialization of housing views housing as a place to park and grow money, as opposed to a fundamental human right. With so much of our rental stock held by just a handful of landowners, these REITs wield undue power over rental market conditions. Furthermore, as out-of-province actors acquire more and more properties, there is a decoupling of housing costs with local incomes for both owner-occupied and rental households, which stands to deepen the affordability crisis.

How Did We Get Here?

Let’s be clear that the situation was not good before these most recent shifts in the market: according to the City of St. John’s Housing Needs Assessment in 2019, at that time 14.5 percent of owner-occupied households and 42.5 percent of renter households were living in unaffordable housing—which is to say, they were spending over 30 percent of their income on housing costs. Over half of those households were in core housing need, meaning they were spending over 50 percent of their income on housing. Recall that all of this is before any of us had heard the word “coronavirus” and you can imagine things have only shifted to the worse.

Of note as well is the fact that the CMHC rental market data is from a time prior to recent interest rate increases.  We can therefore expect all of this to get worse as landlords pass these costs on to tenants. There is no cap on how much rent can be increased in Newfoundland and Labrador, just a requirement for 6 months notice and a limit of one increase per year. It’s probable that landlords will be trying to get out in front of further forecasted interest rate hikes, meaning that when that notice period elapses, we will likely be left with substantially higher rents. Likewise, in the absence of a balanced, prudent rent control program that could allow for landlords to mitigate inflation and other costs, in a changing market there is the potential for tenants to be substantively evicted through rental increases well beyond their means as landlords look to maximize their profits.

Also relevant is the soaring price of home heating fuel, which many rental households depend on. Home heating oil has increased nearly $1.00 per litre since January 2022. While the provincial and federal governments both have funding programs for owner-occupied households to switch from oil to less costly (and more environmentally responsible) electric heat sources, no such program exists for privately-owned rental housing. In the many rental units in which the tenants pay their own utilities, there is no incentive for landlords to front the costs of a fuel source switch or other energy efficiency improvements. The Canadian Urban Sustainability Practitioners define energy poverty as paying more than 6 percent of household income for energy costs. A household burning half a tank of oil per month at the current rate of $2.02 per litre would need to make over $17,500 in that same month to fall below this threshold. It might be funny if it weren’t so sad.

How did we get here? For the last 30 years, Canadian housing policy has focused very much on allowing the market to continue in as unfettered a fashion as possible. In the early 1990s, the federal government completely stopped developing new affordable housing and passed this responsibility on to the provinces. Some provinces continued to develop housing, though at rates much lower than the couple of decades prior to this devolution. In Newfoundland and Labrador, the supply for new affordable housing has effectively flatlined—along with maintenance programs to protect the existing stock—largely due to lack of funds. This, paired with a deepening trough between wages and the cost of living, has brought us to what is widely recognized as a housing crisis that is affecting the wellbeing of communities nationwide.

What Can We Do About This?

To counter the effects of speculation on the housing market, an antidote is needed. There are many levers different levels of government can pull on to change the current situations. But a fundamental, philosophical change has to occur: to consider housing as an immutable human right and essential to the lives of communities, not as yet another way to create and stratify wealth.

Across the world cities are grappling with how unaffordable housing creates labour shortages. Likewise, rural areas of our own province struggle to develop new drivers of economic growth due to lack of available and affordable housing for workers. The solution isn’t new. In fact, it harkens back to the era before the Canadian government divested itself of responsibility for developing housing: investment in community-held assets that remain affordable long-term. This means giving community groups, nonprofits, and cooperatives the means to develop and maintain housing. Where private housing providers set their sights on generating profit—by definition charging rents higher than is necessary to maintain the housing units—community housing has as its main objective simply providing adequate, affordable housing to residents. 

At its inception, the business model for community housing was mixed-income, with the small surplus from market-rent units covering the shortfall of units rented at rates geared to lower incomes. This model is much less sensitive to the whims of government than modern models requiring more intensive levels of subsidy, and could be re-established with wise investment at the building stage. The most recent federal budget makes overtures in this direction, but the devil will be in the details of the rollout of those investments. 

The majority of federal government investment in housing is spent on insuring private mortgages, a fact often glossed over by an assumption that home ownership is the default (and only desirable) tenure type. We assume that ownership is for contributing members of society and does not require government support, when the numbers don’t bear this out. By contrast, the narrative around rental housing, especially community housing, is one of a money-loser that requires too much government expenditure—despite costing less than mortgage insurance programs.

The balance of federal funds goes to a smattering of rental programs, some available to community groups, some available to private developers. The results of these have been mixed at best, often funneling public money to private developers to create units a modest 7 to 15 percent below average market rents—and in some cases, units at rental rates higher than the market median. Furthermore, the vast majority of federal money to build in recent decades have relied on some kind of provincial investment, and provinces such as Newfoundland and Labrador, where governments have been reluctant to provide this funding, have therefore left that money on the table.

A prudent allocation of resources to the creation of non-profit and co-op housing with adequate support for the capacity of those providers to build and manage the projects represents an opportunity to turn the tide on the financialization of housing—and resolve the affordability crisis before the tsunami hits our shores. By creating affordable units, we decrease the cost burden on families who cannot afford market rents, and open up market units for those who can.

The impacts of financialization can be seen in the cautionary tales of large urban centers in Canada, which now rank among the most unaffordable markets on the planet. We can decide to do things differently and avoid the same fate. Unlike the politically expedient measures like gas tax reductions and one-time payments, investing in the development of community housing is a long-term solution to the increasing cost of living that yields lasting rewards for the health and wellbeing of our communities. For three decades of Canadian housing policy, we have been waiting on the market to save us. It’s time to realize that no such rescue is coming and build lasting security for our communities.

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