Since 2018, we have been contending with a near 0% vacancy rate, a stark indicator of a housing market under severe stress. The issue has been compounded by the widening gap between household formations and housing starts. From 2015 to 2023, this gap resulted in a shortage of over 5,000 units, with the most significant deficit occurring in the 2022-23 period. This alarming shortfall reflects the unintended consequences of well-intentioned but restrictive housing policies.
The introduction of the Residential Tenancy Act in April 2023 has inadvertently intensified these challenges. Designed to protect tenants, the Act has led to disincentives for private investment in the rental market. This situation has caused a ripple effect – from inflated rents for new units to a trend towards condominium conversions, both diminishing the rental stock and exacerbating the housing crisis.
PEI’s position as the province with “strong tenant protections” in Canada is a double-edged sword. While it aims to protect tenants, it also deters potential investors from operating rental housing units, severely compromising our capacity to meet the housing needs of our growing population.
Effects we’ve seen from Over-Regulation:
- Decreased Affordability: When new rental properties come on the market, housing providers need to artificially increase the rents in anticipation for low allowable rent increases.
- Increased Condo Conversion: As housing providers seek to recoup their losses, they convert apartment buildings into condos reducing the already strained rental supply.
- Lower Quality Housing: Current rent control measures disincentivizes landlords from maintaining or improving their properties, leading to a decline in the quality of rental housing stock.
- Benefits Higher-Income Residents: Rent control policies need to be targeted to those in need. By applying rent control for high income earners it is reducing the supply of lower priced rental units which could be available to lower-income individuals in need of affordable housing..
- Reduced Housing Supply: 2023 has marked a concerning trend with record-low housing starts, a clear indication of the challenges facing our housing market. The first two quarters of the year witnessed only 444 housing starts, the lowest since 2018 and marginally higher by just three units. This stagnation in housing development is a direct reflection of the current regulatory environment, which has inadvertently stifled the growth of new housing projects.
Immediate and innovative solutions are imperative. We propose the following:
- Comprehensive Tax Credit System: We advocate for a multi-faceted tax credit system targeting multifamily housing projects. This system should include credits for both new construction and rehabilitation of existing properties. Such incentives would attract a broader range of investors and developers, crucial for expanding our rental housing stock.
- Expansion of Low-Rate New Construction Programs: Encouraging new rental property development is essential. This can be achieved by offering more attractive financing options.
- Innovative Financing for Existing Buildings: Enhancing financing options for the purchase and renovation of existing buildings will help to quickly increase housing stock. This could include low-interest loans or grants for retrofitting older buildings, making them viable options for rental housing.
- Streamlining Construction and Permitting Processes: Reducing barriers to new construction is equally vital. Simplifying the permitting process, reducing red tape, and offering expedited services for housing projects can significantly impact the pace of development.
- Apply Market Rent on Turn Selectively: Implement market rent adjustments on tenant turnover with an exception – this does not apply to units participating in affordable housing programs. This way, we protect vulnerable tenants and ensure that properties engaged in these vital projects remain accessible and affordable. This selective application of market rent allows for financial viability in the broader rental market while making space for affordable housing initiatives.
- Long-term Strategic Housing Plan: A comprehensive, strategic plan addressing housing needs over the next decade is necessary. This plan should encompass not only the construction of new units but also the preservation and renovation of existing structures, community planning, and sustainable development practices.
Alternatives such as reducing barriers to new construction and expanding tax incentives for multifamily investments, could promote affordability without the negative side effects associated with over-regulated rent control.
These solutions aim to create a more balanced approach, addressing the urgent need for housing while encouraging private investment. The ongoing housing crisis, if left unaddressed, will continue to have far-reaching consequences across all industries and demographics in PEI. Therefore, we urge the government to take decisive, innovative action and work collaboratively with stakeholders like The Residential Rental Association. Through these proposed solutions, we can pave the way for a balanced, sustainable housing market that meets the needs of all PEI residents.
It’s time for the government to take decisive action and open PEI’s doors to those willing to invest in our province’s future. If you are a housing provider and are interested in learning more about the rental industry on PEI, please contact the Residential Rental Association at executivedirector@rrap.ca. The RRAP is an advocacy group that works towards some of the following:
- United Voice
- Supplier Discounts (coming soon)
- Education/networking opportunities
- Training Sessions
- Lunch and Learns
- Member Meetings
- Latest Rental Forms
- Up-to-Date Procedures and Best Practices
Residential Rental Assocation of PEI