Latest reports indicate the residential construction sector could be in for another bumpy ride in 2024. Much will depend on interest rates, of course, as lowering them would spur new home buying.
But there are other factors that will weigh heavily on the market, such as whether various levels of government introduce new housing tax reforms to make homes more affordable, reduce red tape and streamline the development approvals process, and support the expansion of offsite construction.
2023 was a tumultuous time for the new housing market. Dozens of developers cancelled new projects. A report by CMHC notes that the seasonally adjusted annual rate of housing starts in Canada fell 22 per cent in November from a year earlier. In Toronto and Vancouver, starts were down 39 per cent.
Equally disturbing, RBC indicates only 26 per cent of Canadians can afford a single-family home right now – down from 40 per cent a year ago. About 45 per cent of households can now afford to own a condo apartment based on their income, compared to close to 60 per cent four years ago.
The aggregate price of a home in Canada will reach $843,684 in the fourth quarter of 2024, a 5.5 per-cent annual increase, according to Royal LePage. At the same time, the median price of a single-family home will rise six per cent to $879,164, while the price of a condo will jump five per cent to $616,140.
While we have been talking about housing supply issues for many years now, it appears the chickens have come home to roost. Unfortunately, you can’t just flip a switch and fire up the industry.
It will take a concerted effort by all levels of government to work together – and with the industry – to remedy the crisis. An all-hands-on-deck approach and forward-thinking action are what’s needed.
Governments at all levels and of different political stripes must find common ground to get shovels in the ground on new housing. The residential construction industry will be there to help in any way we can.
They have their work cut out. Many housing policies are still an uncoordinated mess. There remain serious problems as delays in approvals and infrastructure availability are still affecting projects proceeding.
It is an urgent matter as young people are leaving our cities due to housing being unaffordable. The situation has worsened considerably over the past decade, with Vancouver, Toronto and Hamilton among the least affordable cities in North America when comparing home prices to income.
In Toronto, for example, it takes 84 per cent of a median household income to cover housing costs. Housing is generally considered affordable when 30 per cent or less of income is used to cover the cost.
Recently, the feds have taken some action. They announced they would be providing funds through the Housing Accelerator Fund to the City of Toronto to fast-track the creation of 11,780 new rent-geared-to-income, affordable and market rental homes, and improve processes and technology.
However, the city intends to embrace a “public builder model” to deliver the affordable housing without private developers – the very people who have the expertise that is needed to make it happen. This would be a mistake as the building process is complicated and fraught with difficulties.
Private developers and builders construct more than 90 per cent of homes. They know how to get the best bang for the buck and because of their expertise can foresee problems before they occur. Flying solo on this would only lead to problems. The private sector needs to be included in the discussions.
Meanwhile, the feds’ decision to resurrect a post-war effort to develop a catalogue of pre-approved home designs to accelerate the homebuilding process is a commendable vision and effort to tackle the crisis, but it also does not commit to working with the private sector on construction.
CMHC deputy chief economist Aled ab Iorwerth stated in a recent open letter that the scale of the housing challenge is so large that government can’t do it on its own and the private sector must be involved. He noted that achieving housing affordability by the next decade will require a comprehensive and co-ordinated effort that combines private investment, social responsibility and government solutions.
We must get our act together quickly as we have a tall mountain to climb. To restore affordability to housing, we need 5.8 million housing units built in the next six years but only 2.3 million are anticipated.
It won’t be easy. But out of a great crisis can come great opportunity.
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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