HALIFAX—The overall rental vacancy rate in the municipality has hit a new low, and a local expert says if current trends continue, Halifax could be headed for an affordability crisis akin to Canada’s largest cities.

According to data released by the Canadian Mortgage and Housing Corporation (CMHC) on Wednesday, based on its annual October survey of privately owned rental units, the overall vacancy rate in Halifax is down to 1.6 per cent.

That’s down from 2.3 per cent in October 2017, which was the lowest vacancy rate since 2003. The new number, 1.6 per cent, is lower than it’s been since CMHC started tracking this data in the late 1980s.

That decline has pushed up the average rent by 2.1 per cent across the municipality to $1,066, from $1,027 last year. Vacancy rates are lowest for three or more bedroom apartments, at 1.3 per cent. Average rent for those units is up to $1,355, from $1,307 in 2017.

As it did last year, CMHC attributed the increased rental demand to strong immigration numbers, noting that “since 2016 until the end of August 2018, almost 12,000 new permanent residents have landed in Halifax.”

“Strong demographic fundamentals and improving economic conditions continue to support rental demand, outpacing the growth in newly completed units,” said the report released Wednesday.

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Still, the growth in supply is breaking records as well.

“The Halifax rental market has witnessed a significant growth in supply over the past two years, with the number of new rental completions added to the universe reaching almost 1,700 units in the 2018 survey,” the report said.

“However, this elevated level of supply has yet to dampen multi-residential activity as there is currently 3,626 rental apartments under construction in the Halifax CMA (census metropolitan area), surpassing historical levels.”

Neil Lovitt, senior manager of planning and economic intelligence at Halifax real-estate consulting firm Turner Drake, said in an interview that this could be a “pivotal year” for Halifax.

“Basically, everything’s going at full tilt. We’ve never had higher demand. We’ve never had higher rates of completions. We’ve never had higher inventory of housing in the pipeline. We’ve never had higher rates of starts of housing,” Lovitt said.

“I don’t know how much room any of this has to move significantly from where we are today.”

Rent increases over the past few years were most notable in newer buildings, Lovitt said, and CMHC reported this year that demand has shifted to newer, more expensive units.

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But Lovitt noted that those increases are now starting to outpace inflation even in older buildings, and the overall vacancy rate is putting pressure on every type of unit.

“Really if we don’t get back to a higher vacancy rate, we could start to see some of the price increases that we’ve seen in other markets like Toronto and Vancouver, which spells trouble for a lot of the existing residents,” he said.

There’s already a lack of affordable housing in Halifax, a problem Lovitt said has built up slowly over time, with rents rising slightly faster than incomes.

“It’s kind of evolved over decades, really,” he said. “And now you’re getting to a point where we haven’t really done anything about that for quite a long time, and a lot of forces beyond our local control could really turn that into a crisis quickly.”

Those forces are the record immigration numbers driving demand and the market forces driving supply.

“And both of those, on one hand, we really, locally, don’t have a lot of control to influence international migration and we also really have limited ability to influence the pace of construction, at least in the short term,” he said.

“If the demand continues to outpace supply, we’re really kind of looking at some concerning implications within a couple years.”

Lovitt said he did some math as a “thought experiment.”

“Basically if the trends we’ve seen in the last two years kind of keep pace, where we’re not keeping up with demand as far as supply goes, we’ll be at a zero per cent vacancy rate in four years,” he said.

Conversely, he said, in order to get back to a more healthy three per cent vacancy rate — Halifax’s approximate average over the last 20 years — the number of units coming onto the market each year would have to increase by 22 per cent.

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