PEI’s housing shortage: A bad problem gets worse
The Island is now only building a third of the homes needed to keep up with growth
Today, the Canada Mortgage and Housing Corporation (CMHC) released its quarterly housing starts data. The report showed a big jump in starts from the previous quarter, especially for apartments.
But the news for Prince Edward Island remained grim, with the whole province reporting only 321 housing starts between April 1st and July 1st of this year. In January, the then-Minister of Housing said the Island was going to see a “significant amount of building starts once the snow’s gone.” While starts are up from the previous quarter, they are far below what PEI was building in the same season of the past few years.
And as if declining housing starts are not bad enough, the problem is being exacerbated by a record-breaking number of new households. PEI’s population was around 178,680 on Canada Day this year (according to StatsCan’s real-time population clock). We do not know exactly how many households would have formed over the past twelve months, but we can make some educated guesses if we are to assume that: a) the age of the province this year is roughly the same as it was in 2022 and b) that headship rates for each age cohort are an average of those from the 2016 and 2021 censuses.
All things being equal, PEI added over 3,300 new households since July 1, 2022, while only building 1,146 new homes over the same period. This means that the Island’s housing shortage grew by over 2,100 units in a single one-year period.
In the past year, the province only built a third of the total units required just to keep up with population growth — let alone address the structural shortage that has been building up since 2015. All told, the province has accrued a structural housing shortage of around 5,400 units of all types over an eight year period. More than half of this shortage was built up since the pandemic began.
What caused the Island to get in this mess?
The most convenient target of finger pointing is immigration, and it is easy to see why people put so much weight on growth pressures from abroad. PEI is the fastest growing province in Canada, and most new Islanders arrive via international immigration, including through permanent and non-permanent tracks. Charlottetown has a higher concentration of international students than any other urban area in Canada, with more than 1 out of every 50 Charlottetonians being a non-permanent resident with either a study or work-study permit.
But what this observation misses is that the share of the population in each age cohort plays a big role in predicting household formation. Like in other provinces, younger residents tend to have lower headship rates than older age cohorts, meaning they are less likely to form their own household. This can be due to a combination of factors such as affordability constraints or choices to live with other relatives such as parents or grandparents. Where this ties into PEI’s population growth is that newcomers are significantly younger than the Island’s incumbent population. So much so that a single year of international immigration lowers the age of the province by around four months.
The other big source of population growth on the Island is due to interprovincial migration. This can be attributable to PEI expats returning from work in Ontario and Western Canada, but also due COVID-related movement from high-cost cities like Toronto to settle (or sometimes retire) in a province that is cheaper relative to their income. Interprovincial migrants are also much wealthier and older than international migrants, and are thus more likely to form their own households.
Using age as an indicator of household formation, it is possible to estimate that international immigrants are only responsible for around half of the yearly addition to PEI’s housing demand, despite accounting for more than 2/3rds of new arrivals. The rest of the housing demand can be attributable to either a) older residents of other provinces moving to the Island or b) the incumbent population aging into cohorts that have higher headship rates.
The international migrant share is also likely overstated because newcomers tend more than non-immigrants to be living in “unsuitable” housing — or households with too many members relative to the number of bedrooms. Mike Moffatt notes that this can only be partly attributable to cultural preferences for multigenerational housing, and they are actually pretty rare on PEI. Multigenerational households tend to be more common in the Island’s rural areas where immigrants are not well represented. In my opinion, the crowding among PEI’s newcomers is more likely a product of economic conditions and housing scarcity rather than cultural practices. This should reinforce the need for the province to let more housing options be built for all Islanders — be they new or lifelong residents.
Uncomfortable conversations
When the Legislature sits in the fall, there will need to be some uncomfortable conversations about the adverse impacts of the policies they have crafted — such as a property tax structure that encourages sprawl into unincorporated land and farm area and a rent regulation policy that may have ended up leading to dozens of rental units getting converted into condos (Vox writer Jerusalem Demsas has some recommendations on how to design a rent control policy that better protects renters). Additionally, there will need to be a debate on how the province can support local governments in overcoming the NIMBY barriers that get in the way of planning for growth.
Fortunately, the province’s housing minister appears to be sending a strong signal of where the housing strategy is headed:
“We also have to look at how we can create the environment for more housing in this province. Whether it’s land-use planning, bylaws, rezoning, property-tax incentives or the permitting process, we need to make every effort to remove barriers for development. We need to make P.E.I. an attractive place to invest in housing.” — Minister Rob Lantz (via CBC PEI).
A good way that Minister Lantz can support development is by drawing inspiration from some municipal initiatives. Charlottetown’s draft new official plan could allow up to 3 units on any residential lot, and set higher density levels along major corridors and intersections. Stratford is working with the Gray Group to build a town centre that will add thousands of units near municipal provincial services — while reducing parking requirements to improve the feasibility of the project. Summerside’s attainable housing task force could offer the city a roadmap to amending its official plan to allow more density in residential areas. Even smaller municipalities with planning authority are looking at ways to build more types of housing to both attract young couples and let seniors age in place. Minister Lantz should look to these examples from big and small communities alike when setting and raising bars on housing — and get the province to play a more active role in paying for growth-related infrastructure.
The Municipal Infrastructure Fund committed by the government in the 2023 budget could help right some past provincial wrongs, but action is needed to avoid the economic, demographic, and political consequences of housing shortages. At a contentious planning meeting a few weeks back, Summerside Mayor Dan Kutcher put it plainly: if we do not prioritize supply, everyone will be made worse off.
Provincial policymakers should heed Mayor Kutcher’s warning when designing the new housing and population growth strategies. The snow might be gone, as Minister Lantz’s predecessor alluded to a few months back, but the housing winter is far from over. Renter protections cannot realistically be enforced if rentals do not remain rentals and if more options (including non-market housing) cannot get built. If the province does not react soon, then PEI’s tenants will continue getting a cold shoulder in the Island’s rental market — lest they move to some place warmer.
My full dataset can be found here.
