Editorial – Why are fewer homes being built?

In the past six years, there has been significant upheaval in home prices, rental costs, and housing construction. This led to calls to increase new construction, and for some politicians – including Ontario Premier Doug Ford – to make wild pledges of extreme housing construction goals. Yet for all the prognostications and announcements, home construction is not where it needs to be in the country. Why?

A national report from the Canada Mortgage and Housing Corporation from July 16 said that the six-month trend for housing starts improved by 3.6 per cent nationally. But that growth is not consistent across the country. British Columbia and Atlantic Canada have growth, especially Vancouver and Halifax. The Prairie provinces also have some modest growth, as does Quebec (including Montreal). Where housing starts have not only flatlined but decreased precipitously is in Ontario.

Multi-unit developments in Toronto have dropped by 40 per cent since this time last year. Part of this is attributed to problems in that city’s superheated condo market where many developers are in financial peril as newly-completed condo units pre-sold at record high prices are now being defaulted on by buyers. That glut in Toronto has a ripple effect for other developments in the city, and the province.

Even with some cities like Mississauga and Vaughan cutting development charges in half, those charges still add over $100K to the cost of a single-family home and $75-80K to a condo or apartment unit. Despite the passage of acts by Premier Doug Ford’s government, housing starts in big cities are tanking. That has a negative effect in rural areas across the province too.

Municipalities with lower but still significant housing charges in rural areas attract in-province migration to more affordable areas. The lack of services and growth of sprawl negatively affect those areas, and price out local residents. New development charges (South Dundas) and continued development charges (rest of SDG) make new home construction less attractive, slowing the potential for growth and increasing prices due to lack of supply. So long as demand for affordable housing outpaces supply, affordability is going to remain an issue.

The Ford government has passed multiple acts to help “kick-start” development, but municipalities and developers are not biting because both parties do not want to take a financial hit to achieve the province’s goal of building 1.5 million homes by 2031. Until there are significant financial incentives from the province to keep municipalities financially whole, and keep profit margins acceptable for developers, Ontario will continue to lag behind the rest of the country in building new homes.