By Richard Lyall
RESCON
Although interest rates are lower and inflation has cooled, housing starts and sales remain abysmally low. Basic math dictates we will not reach the number of homes needed to restore affordability.
New condo apartment sales in the Greater Toronto and Hamilton Area (GTHA) last year totaled 4,590 homes. That’s a 78-per-cent decline compared to the 10-year average of 20,835 homes.
Only 802 new condo apartments were sold in the final quarter of 2024 and only a half dozen new projects were launched.
A survey by the Ontario Real Estate Association only adds to the malaise as it indicates that homeownership continues to be perceived as unaffordable due to costs such as development charges. Equally disturbing, of those who aspire to own a home, nearly half have given up or are pessimistic.
Grim outlook
The outlook for the next few years is equally grim.
A forecast put together for RESCON indicates that housing starts over the next few years will likely weaken and the supply shortage could get worse. Alarmingly, the report also indicates employment in residential construction has peaked and will probably fall quite a lot in the years ahead.
According to the report, there will be a further weakening of employment and new housing starts well into 2025, followed by a slow recovery of the economy and housing activity from 2026 to 2028.
These findings are particularly worrisome for builders as they point to a weakening residential construction market at the very time we need to build more housing. Equally concerning, the outlook envisions a scenario whereby reduction in residential construction employment and job losses in associated industries could become a second substantive issue.
To spur the market, affordability needs to be returned to prior levels via a combination of interest rate decreases and reduction in government-imposed costs and land prices. To spur the market, governments need to reduce the tax burden on new housing – particularly development charges.
Government-imposed costs
Removing government-imposed costs from the price of new homes would significantly impact prices. In the GTA, the average municipal charge for new homes is $164,920 – about $42,000 higher than in 2022. For condos, it is $122,387 – about $32,000 higher than in 2022. Costs of delays in approvals vary by municipality in the GTA from $2,672 to $5,576 per month.
We find ourselves in this situation for a number of reasons, such as heightened interest rates, rising land costs, development fees and construction costs, bureaucratic delays and red tape that have slowed development activity across the province. Builders can only build what buyers can afford to buy.
Governments at all levels need to work in unison to tackle the problems that are affecting construction of new homes.
Progress and improvement
Indeed, there have been some good plans floated lately. The federal Conservatives have said that, if elected, they would remove the sales taxes on new housing sold for less than $1 million.
Some municipalities have also stepped up. Last year, Burlington passed a bylaw to reduce developers fees by 45 per cent and, in November, Vaughan rolled back its rates to those in effect in 2018. Mississauga has adopted recommendations in a report aimed at reaching a target of building 370,000 homes in the city by 2051 – an increase 124,000 units from the previous goal.
At RESCON’s recent annual general meeting, Premier Doug Ford laid out what the province has done to cut costs and red tape and get shovels in the ground for housing, including removing the HST from purpose-built rental housing and investing more than $3 billion in housing-enabling infrastructure.
As he stated, “We’re using every tool in our toolbox to kick-start construction and expand our housing supply.”
When it comes to housing, we have to pull out all the stops.
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.
