Last Updated on November 28, 2024 by CREW Editorial
There was a slight uptick in Canadian housing starts in September from the month before, but it was not nearly enough to move the needle in a substantial way and address our worsening supply shortage.
Canada Mortgage and Housing Corporation reports that the six-month trend for housing starts dropped by 1.9 per cent in that month, continuing a long-term slowdown in construction activity.
It’s not the same across the country, mind you. There have been increases in Alberta, Quebec and the Atlantic provinces, but housing starts in Ontario and British Columbia declined significantly.
According to CMHC, Toronto and Vancouver reported year-to-date decreases of 20 per cent and 19 per cent, respectively, compared to 2023.
At a time when we need new housing the most, we are well short of the number of homes needed to restore affordability to the market.
Starts have declined
We seem to be taking one step forward and two back.
Ontario, for example, is on track to start building the fewest new detached homes since 1955, a new economic monitor report by the Financial Accountability Office (FAO) has revealed.
The financial watchdog reports that housing starts in the latest quarter have declined by 16.9 per cent compared to the same period last year.
This does not bode well for the province’s goal of building 1.5 million homes by 2031. To hit the target, Ontario would have needed to start 34,100 homes per quarter, beginning in 2021. Over the past three years, the FAO found Ontario has averaged 22,900 starts per quarter – two-thirds of the goal.
Alarmingly, to hit the target, the province would need to beat its 2021 building pace by 74 per cent and hit record highs every quarter from now until 2031.
A tall order, indeed.
To those of us in the building industry, it does not come as a surprise. Sales started falling off last year because the costs to build are too high in large part due to exorbitant taxes, fees and levies on new housing, and because approvals take far too long, which only adds to the price tag of a new build.
Development charges, in particular, are killing the industry. They have increased more than 1,000 per cent in some municipalities over the last 10 years. These charges, which are ultimately borne by the purchasers, have gotten out of control and are significantly adding to the cost.
There is more pain ahead
The future doesn’t look any better.
A report that was prepared for RESCON by a Toronto-based economic research firm led by Will Dunning found that housing starts over the next few years will likely weaken, the already-dire supply shortage could get even worse, and employment in new residential construction will probably fall quite a lot in the years ahead which could have significant economic repercussions for Ontario.
The report, titled Housing Market Outlooks in Ontario, contained forecasts covering 2024 to 2028 for Ontario, as well as municipalities in the Census Metropolitan Areas of Toronto, Hamilton and Oshawa.
The report provided two sets of scenarios. In both, a further weakening of employment and new housing starts continues well into 2025, followed by a slow recovery of the economy and housing activity during 2026 to 2028. By the end of 2028, conditions will not have fully recovered.
The outlook is particularly worrisome for residential builders as it points to a weakening residential construction market at the very time that we should be building more housing. Equally concerning, the findings indicate that a decline in residential construction employment and job losses in associated industries could become a second substantive issue weighing on the broader economy.
Governments must take action
With a critical need for new housing, it is imperative that all levels of government take immediate action to boost construction by lowering the taxes, fees and levies and reducing the red tape and bureaucracy which slows the industry and adds to the cost of housing. To spur the market, we need conditions that allow builders to build houses that people can afford. Otherwise, we may be in dire straits as new home construction stalls and unemployment in the industry rises.
Removing government-imposed costs from the prices of new homes would significantly lower the price tag. In the GTA, the average municipal charge for new homes is $164,920 – about $42,000 higher than in 2022. For apartments, the current figure is $122,387 – about $32,000 higher than in 2022. The costs of delays in approvals varies by municipality within the GTA from $2,672 to $5,576 per month. When applied to the typical delay period, it can add $43,000 to $90,000 per unit.
Governments must work in unison on the problems. They have made some inroads but there is more work to do.
The move by the federal and Ontario governments to remove the sales taxes on new purpose-built rental projects was welcome. Now it needs to be extended to all market-built housing. The federal Conservatives have floated the idea for new housing sold for under $1 million. We hope the province follows suit.
We must take steps to lower government-imposed costs and reduce the bureaucracy associated with building new homes. If we don’t the consequences could be catastrophic. Time is running out.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.
