Ontario budget shows lower projections for new home construction

March 24, 2023, Ontario – Projections in Ontario’s budget for housing starts show the province’s target to build 1.5 million homes in 10 years slipping further out of reach with each passing year.

Nearly 100,000 homes were built in the province in 2022, the first year counting toward the goal, but the forecast shows the number of housing starts in the next few years struggling to crack 80,000 annually.

The projections are revised downward from what was expected in last year’s budget, including an estimate of 79,300 homes built in 2024, down from the 87,300 expected for 2024 at this time last year.

Finance Minister Peter Bethlenfalvy says those private-sector forecasts reflect the economic environment, in which rising interest rates are hampering building.

Bethlenfalvy says nearly all of Ontario’s municipalities have adopted housing targets set for them by the province, so the government will continue to work with cities, the private sector and others to build homes.

Richard Lyall, president of the residential builders’ group RESCON, said he is pleased to see that the government is putting $75 million over the next three years to the Skills Development Fund and $25 million to the Ontario Immigrant Nominee Program, in part to increase skilled trade immigration.

“With a massive skilled trades shortage looming, training the next generation of workers to build those houses is equally important (as a commitment to meeting the 1.5 million target),” he said in a written statement.

Tim Hudak, CEO of the Ontario Real Estate Association and former Progressive Conservative leader, said despite the government’s moves to boost housing supply, rising interest rates are dampening growth, so the province should redouble its efforts.

The effects of rising interest rates hit the housing market hard last year, with average home resale prices in January of this year down 21.3 per cent from their February 2022 peak, and the number of home resales was down 43.4 per cent, the budget said. But housing market activity is expected to start stabilizing.

The number of home resales is expected to decline by nearly nine per cent in 2023, though they are expected to rebound 21 per cent the next year before returning to more consistent levels, the government said in the budget.

Average home prices are expected to decline 9.7 per cent this year, before rising 2.2 per cent in 2024 and continuing to go up in the two years after that, the budget said.

This report by The Canadian Press was first published March 24, 2023.