RESCON: The housing conundrum

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Just as more new homes are needed, less homes are being built

I fear that we are only seeing the tip of the iceberg when it comes to the slide in construction and sales of new housing.

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This is not a good sign for those who are seeking housing. Nor does it bode well for our economy.

Sadly, new home construction in Ontario has slowed to a pace not seen since 2018, according to latest figures released recently by the Canada Mortgage and Housing Corporation. Worse, economists see no signs of the slowdown reversing in the months to come.

This is happening at a time when we need more new housing the most and puts the goal of building 1.5 million homes by 2031 in serious jeopardy.

In April, construction began on only 5,589 homes in Ontario. That’s the lowest number for that month in six years. The province is on pace for just 77,920 housing starts in 2024. To put that in perspective, that would be a 15-per-cent drop from 2023 and the lowest annual total since 2020.

Economists figure the situation will continue for at least the remainder of this year due to high interest rates and myriad other issues such as excessive red tape, outdated planning regulations, inefficient approvals processes, and exorbitant taxes, fees and levies on new homes.

Unfortunately, the bleak situation could get worse before it gets better. The gap between the cost to build housing and what people can afford is troubling.

The situation has been decades in the making and stems from years of growth mismanagement by successive governments at all levels. There is plenty of blame to go around here.

I recently spoke on the issue to the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities and noted that the situation has worsened considerably in the last five years. I also pointed out that the red tape, planning regulations, inefficient process, and high taxes and fees are the reasons.

Our present growth management plan wouldn’t qualify for running a paper route, much less a blueprint for solving the housing crisis. Some steps have been taken by the various levels of government, but more bold action is desperately needed if we are to get out of this quagmire.

The onerous taxes, fees and levies on new housing make it virtually impossible for developers to build houses that are affordable. They are regressive levies that hit buyers the most.

The increase in taxes over the last 20 years in the GTA is the equivalent of a down payment today. Taxes on new housing in the GTA are well beyond most other jurisdictions in North America.

To put this in perspective, taxes, fees and levies on a new home in Toronto now represent 31 per cent of the cost. On a $1-million home, that’s $310,000 that must be added to the price tag.

First-time homebuyers, in particular, have been virtually priced out of the market. It takes a household income of $253,000 to $263,000 to qualify for the average-priced home in Toronto.

A decision by the federal and provincial governments to remove the HST/GST on purpose-built rental apartment buildings was a step forward but most of the housing market is owner-occupied dwellings. The bulk of our new housing is built on private land and because of private sector investment. That segment must function properly. Otherwise, the dream of home ownership is dead.

Complex and complicated approvals processes also delay new home building and add to the cost, which is borne by buyers. Red tape at all levels of government is unnecessarily impeding residential homebuilding. Across the country, it takes years to get projects approved.

Mired by outdated planning regulations, inefficient approvals processes and unresponsive file management, we simply can’t get housing built quickly.

Canada should be a leader when it comes to planning and approvals processes, but the country is ranked 34^th out of 35 OECD countries.

We need a modernized, streamlined and digitized development approvals process like the One Ontario system that is presently being piloted.

In Canada, we are luck to occupy one of the most valuable tracts of real estate on the planet. We have unparalleled resources and hard-working citizens – everything to make our country prosperous and homes affordable for all. Yet, we can’t build homes with a price tag that is within the means of the middle class.

Collaborative, sound and expeditious action is needed – by all levels of government if we are to solve the problem. With the supply of housing falling, we must have focused efforts to speed up the pace of change.

To make an omelette you need to break a few eggs. It is time we got cracking.

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.