Perfect storm of factors contributed to current housing crisis in Nova Scotia

It’s a problem we see or hear about every day. Tents in the park, people living in cars, being evicted or worried they won’t make rent. This week and beginning today, we’re looking at the scope of the problem, how we got here, who can fix it and how. 

HALIFAX, N.S. — Nova Scotia was woefully unprepared for a perfect storm of socioeconomic factors that led to the current housing crisis.

“It’s essentially a supply and demand issue,” said Lori Turnbull, director of the school of public administration and an associate professor of political science at Dalhousie University in Halifax.

“The supply has not kept up with the need, the demand, which has been steadily increasing.”

More from our weeklong series on the housing crisis: The human cost of Nova Scotia’s fixed-term lease rules

The factors contributing to the housing crisis, according to the recently released Provincial Housing Needs Assessment report, are a rapidly increasing provincial population, rising interest rates, a reduction in consumer spending power and a shortage of skilled labour — all coinciding with the COVID pandemic that consumed government attention and resources at the expense of attending directly to ominous perfect storm conditions.

Turnbull said the crisis was “absolutely” predictable and governments could have acted earlier to lessen its impacts.

“Elected governments tend to think in the short to medium term,” Turnbull said. “They plan according to the electoral cycle and they can’t control what happens if they are defeated. In other words, even if they make long-term plans, it is difficult to see them through.”

Turnbull said the “complexity of multilevel governance and the fact that federal, provincial, municipal and Indigenous governments are all involved in this complex policy issue,” exacerbated the situation.

“All of them (levels of government) have electoral calendars that do not sync up, which makes planning even more difficult. Things fall through the cracks. Fixing the housing crisis will require considerable political will, intergovernmental co-operation, a lot of money, and a long-term focus.”

A manager with Turner Drake & Partners Ltd, one of the primary contributors to the 146-page housing needs report completed for the province and released in late October, says the perfect storm characterization is a fair one.

“The perfect storm, all things hitting at once and particularly exacerbated by the pandemic, that put us in extremely un-ideal conditions and it’s not only us experiencing it,” said Andrew Scanlan Dickie, manager of the planning division for Turner Drake.

The housing needs assessment, which captured feedback from 21,000 Nova Scotians, 115 employers, and more than 100 organizations, concluded that many Nova Scotians are facing difficult housing circumstances and the overall housing outlook will worsen if demand continues to grow and remains unmatched by supply.

The perfect storm began percolating in the middle of the previous decade, led by current and anticipated population growth that has been driven primarily by the overwhelming in-migration of people since the end of 2019, intensifying even more significantly throughout 2021 and 2022, the report found.

From 2016 to 2021, Nova Scotia’s population increased by five per cent and projections forecast a population increase of 14 per cent from 2022 to 2032, translating to about 169,870 new residents over the next decade.

Since 2021, Nova Scotia has had the highest percentage increase in population among all Canadian provinces.

The total number of households increased along with population over the same period, with a rise of eight per cent. The most significant increases by household type were in single persons and people living with roommates at 14 per cent, lone parents at seven per cent and couples without children at six per cent..

The overall increase in households translates to a bigger housing demand, and an increase in demand leads to changing prices that have an inextricable effect on affordability. The Turner Drake-led report adopts the Canada Mortgage and Housing Corporation (CMHC) definition of affordable as a household that spends 30 per cent or less of its before-tax income on housing.

The report, using 2022 median sale prices by dwelling type, found only the top 18 per cent of earning households could afford the median sale price of a single or semi-detached dwelling.

Using median home sale prices from 2022, the analysis found that a median before-tax household income of $130,000 was just shy of what was needed to afford a single-family home, attainable by at most 30 per cent of couples, six per cent of single parents and only two per cent of single persons.

The situation was more dire for renters, where only the top five per cent of households were able to afford to shift to ownership. The affordability of home ownership plummeted since 2019 with home sale prices increasing by 67 per cent in HRM and 79 per cent in the rest of Nova Scotia.

Dwelling prices in Nova Scotia have increased to the point where even people in the highest income categories have started to be phased out of affordable homeownership.

Turnbull said some federal measures like taking the GST off rental constructions can help incentivize affordable housing projects, as can the loan program for rental construction that was announced in the recent fiscal update.

“It’s about minimizing risk and cost on the construction side,” Turnbull said.

“On the provincial side, governments can work with municipalities to remove red tape and get things moving more quickly, but any breakdown or fast tracks when it comes to approvals come with risks of their own,” she said, using the Greenbelt fiasco in Ontario as an example.

“It’s not necessary to avoid public consultation altogether. It’s important to have citizen engagement in community planning. It’s also important to ensure that there are checks and balances so that rules are followed.”

The escalating price trend is not unique to ownership, with the rental market in Nova Scotia experiencing comparable price increases since 2016. Between 2016 and 2022, the median price of renting increased by 29 per cent to 44 per cent, depending on unit size. And a significant share of those increases happened between 2019 and 2022.

The population increase coincided with changes to the purchasing power of individuals and households related to rapid inflation and rising interest rates, the assessment found.

Between December 2021 and 2022, the Consumer Price Index, which tracks overall changes in what people pay for goods, increased by 7.6 per cent in Nova Scotia, while the average hourly wage across all industries increased by 5.3 per cent over the same period, resulting in a real wage decrease of 2.3 per cent.

The Turner Drake report found that an increase to the cost of materials, combined with labour shortages, has created a reduction in the viability of housing development. Despite those factors, there has been a greater recent pace of construction in the province than historically but that pace is still not adequate to meet the housing demand.

Turnbull echoed the assessment report’s finding that the affordability problem is particularly pronounced among the student population.

“We have a high number of universities, particularly for such a small province, and students struggle to find places to live that are affordable,” Turnbull said. “We rely on students coming to our universities but then we have a hard time finding accommodations for them.”

The assessment report points to a current overall housing shortage of between 25,000 and 30,000 units in the province, including a shortage of 15,000 to 20,000 units in Halifax Regional Municipality.

The projected growth scenario showed an estimated 104,800 units are required to meet provincial demand by 2032, 77,100 of which are estimated to be required in HRM.

At the current pace of construction that puts 6,000 units on the market each year, the Turner Drake-led analysis found there will be a shortage of 41,200 housing units by 2027-28 and 44,000 by 2032 if aggressive action is not taken.

“We need more, more supply, more people to build and more collaboration,” Housing Minister John Lohr said in introducing the province’s five-year housing plan in conjunction with the October release of the housing needs assessment report.

“I said from Day 1 that fixing the housing crisis and increasing the housing stock is going to take time, hard work and a willingness to do things differently,” Lohr said.

The housing strategy pledges a $1-billion investment over five years to create conditions necessary for 40,000 new housing units across Nova Scotia.

The government’s five-year targets include 26,000 new units approved for fast-track development through existing special planning areas, shaving 12 months off housing approvals in HRM, 3,000 new homes to be supported on provincial land, 1,500 households to be created through incentives for secondary suites and conversion of short-term rentals, 1,200 new long-term care rooms to help seniors and other Nova Scotians live in dignity and 9,500 new homes to be supported through tax measures and legislative changes.

The plan calls for making at least 17,250 household units more affordable over the five-year period and improving housing conditions for more than 47,900 households.

“It’s too early to tell,” Turnbull said of the potential effectiveness of the housing strategy to turn the tide. “It seems like it’s going to take a long time for the strategy to have effect, and the crisis is happening now.”