High interest rates, excessive taxation and bureaucracy, as well as the cost of materials and labour are making it difficult for the residential construction industry to keep its head above water these days.
To make progress and get shovels in the ground on much-needed new housing projects, the conditions must be changed. It makes little sense to build a home that people can not afford to buy.
Another equally daunting hurdle, though, is the lack of critical infrastructure. It’s something that is often out-of-sight and out-of-mind, but adequate water, wastewater and stormwater infrastructure are crucial to accommodating growth and bringing more homes and condos on stream.
RESCON and other groups have been urging governments to address infrastructure constraints like sewer capacity, and to ensure the cost of building does not fall entirely on municipalities which must collect fees for the work via taxes, fees, levies and development charges. The exorbitant add-ons have been crippling the industry, merely adding to the cost of housing.
New housing is already taxed to death. Exorbitant taxes, fees, levies and development charges imposed on new residential construction account for roughly 31 per cent of the cost of a new home. The amount is passed on to home buyers in the form of higher costs for housing.
Thankfully, the call for infrastructure improvements is being heard.
In Ontario, the government announced just over $1.6 billion in new housing-enabling infrastructure in an effort to reach the previously announced target of building 1.5 million homes by 2031.
The money includes $1 billion for the new Municipal Housing Infrastructure Program, which emphasizes projects that can build the greatest number of homes, and another $625 million for the Housing-Enabling Water Systems Fund (HEWSF) which will help municipalities repair, rehabilitate and expand drinking water, wastewater and stormwater infrastructure.
The new funding complements an original $200-million investment in the HEWSF, a $1.2-billion Building Faster Fund that rewards municipalities on target to meet their provincial housing targets, as well as an investment of nearly $2 billion for the Ontario Community Infrastructure Fund.
The money will help municipalities fix and build the infrastructure to support construction of more homes.
The federal government has also stepped up to the table, launching a $6-billion Canada Housing Infrastructure Fund. Money in the fund will be used to support the construction and upgrading of water, wastewater, stormwater and solid waste infrastructure in municipalities across the country.
There are some caveats, though. For example, municipalities must allow as-of-right fourplexes, freeze development charges for three years and accept incoming changes to the National Building Code.
The feds are also adding $15 billion to the Apartment Construction Loan Program, launched in 2017, to support the construction of new rental homes by providing financing to home builders.
While welcome, these announcements are long overdue.
An earlier report done for RESCON by the Canadian Centre for Economic Analysis (CANCEA) found that the federal government collects more than 30 per cent of the taxes on new homes but returns less than seven per cent to municipalities in terms of funding for supportive infrastructure.
There are tremendous social value consequences to not providing the proper infrastructure to accommodate more new housing. Another report done by CANCEA figured out the social value cost related to housing unaffordability and found it to be about 1.75 times greater than that of cancer in the GTA. It’s a very stark indication of the severity of the housing crisis that we face.
We are in desperate need of more new housing but are currently heading in the wrong direction. StatsCan reported recently that residential construction investment in Canada came in at $13.6 billion in January 2024, compared to $13.9 billion in the same month a year earlier.
The faster we get shovels in the ground for supporting infrastructure the better. We must keep the dream of home ownership alive. Presently, it is on life support.
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.
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