Ontario Construction News staff writer
Housing starts over the next few years will likely weaken and the already-dire supply shortage could get even worse, the Residential Construction Council of Ontario (RESCON) is warning.
A new report released last week shows employment in new residential construction sector “will probably fall quite a lot” in the years ahead.
The report, titled Housing Market Outlooks in Ontario, was prepared for RESCON by a Toronto-based economic research firm led by Will Dunning who has been analyzing housing markets for more than 40 years for clients in the private, public and not-for-profit sectors. It provides an overview of the housing market and develops forecasts covering 2024 to 2028 for Ontario, as well as municipalities in the Census Metropolitan Areas of Toronto, Hamilton and Oshawa.
For new home sales to recover, affordability needs to be returned to prior levels via a combination of interest rate decreases and reduction in government-imposed costs and land prices, although both scenarios seem unlikely to happen. The report cites other factors that need to be addressed, such as delays in land use approvals and infrastructure, the amount of developable land available for purchase by builders, and escalation of mortgage regulations which have reduced mortgage amounts that can be obtained by buyers.
“The findings of this report are particularly worrisome for builders as they point to a weakening residential construction market at the very time we need to build more housing,” said RESCON president Richard Lyall. “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 weighing on the broader economy.
The report paints two 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.
“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 impact prices. 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.
“The bottom line is that all governments need to get their act together and work in unison to tackle the problems that are affecting construction of new homes,” Lyall said. “Governments have made some inroads and the recent plan floated by the federal Conservatives to remove the sales taxes on new housing sold for under $1 million is a good start.
“We hope the province follows suit, and we need to reduce the bureaucracy associated with getting new homes built. If we don’t take these steps the consequences could be catastrophic for our industry and the economy.”
Click here for a copy of the report.
