Envision Saint John says the growth in the region has created a bottleneck for housing and there are issues facing the development sector that are slowing housing starts.
Jeff Cyr, the organization’s executive director, has been presenting to municipal councils in the region to show the scope of the problem, including the obstacles to development.
“It’s not something that is unique to Saint John,” he said in a presentation to reporters on Thursday. “We’re seeing around 40 to 50 per cent of what demand should take.”
The population is quickly outpacing the ability to build housing for a number of reasons, Cyr explained.
“In Atlantic Canada, we’ve seen growth rates increase significantly, so we were growing between two to six hundred people a year and the industries were built up around that number. Now we’re jumping to 3,000 a year,” he said.
It means developers would have to increase their output of housing units by six times.
In linear population growth times, at least two developers in the region went under trying to make their developments viable, Cyr said, adding there is a lot of up-front equity required from property developers.
In the mid-2000s, Saint John saw its slowest periods of growth, and it could mean there is less capacity to expand quickly to meet the continued demand.
“We’re in a position where we have to do more with less,” he said.
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In Saint John, though, housing costs are higher than ever. Only about 15 per cent of people can afford to build a new home if there are no other debts.
By the numbers
In 2019, the average cost of a home in Saint John was about $445,669 and in 2023, the number sits at $644,550. According to ESJ, incomes would have to have increased 63 per cent.
A developer also carries a lot of equity into the approval process, which means carrying financial burden until well into the development phase.
It can take between 18 to 24 months to have a development project completed.
There are four phases to consider, Cyr said. The pre-development phase, approvals, development and sales/occupancy. Land acquisition is the biggest challenge in those phases. In New Brunswick, it is hard to come by land.
Cyr said the assessment process is also dated and often undervalues land, which can prompt land owners to hold on to the land until there is a better assessed value or a better price.
If a developer gets a bad sales price, it can equate to lost units.
For example, if a developer pays $500,000 for a piece of land to build 40 units, and it costs $12,500 per unit, but a bank appraisal for the unit is only $10,000 per unit, a developer could lose $100,000 or seven units.
The same idea applies to when density is reduced.
Construction costs have also soared, according to Cyr.
Resident building has increased 158 per cent, while the cost of high-rise apartments has increased almost 140 per cent.
The cost to build a single detached home is up 162 per cent, adding in a growing labour shortages crisis scheduled to make its peak in 2030.
‘Final thoughts’
Envision Saint John finished its presentation by putting together final thoughts for councils to consider as it looks to take on housing shortages and affordability.
Cyr said there must be a culture shift in how New Brunswick sees development and density.
“We’re probably going to have to adapt culturally to smaller houses, smaller units,” he said.
He said there is a lot of concern about density, but density does not lower property value, it enhances it. It will also mean municipalities looking at the infrastructure and how to support higher density in urban areas.
Cyr explained the phenomenon of not-in-my-back-yard (NIMBY) must be dispelled as well.
“A critical cultural risk,” his presentation read. “The model needs to change and NIMBYism could make that challenging. With cost pressures limiting the target market for lower density developments, the region will need to adapt to higher density development, even within existing neighbourhoods.”
Municipalities and all levels of government must capitalize on the areas it has influence over to come up with solutions to affordability and economic issues facing housing in the region.
Andrew Beckett, ESJ interim CEO, said the regions growth continues and the demand must be met.
“There are jobs here, there are opportunities in this area … there is not enough housing to house the people that we need to have in this region and the people that are ready to come to this region,” he said.
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