Housing Targets Falling Out of Reach

Despite governments’ best efforts, it looks as though the target of building 3.5 million new homes across the country by 2030 is not attainable.

Canada Mortgage and Housing Corporation made the projection in 2022 and reaffirmed its numbers a year later. Meeting that target, it said, would help to restore affordability in Canada’s housing market.

Here in Ontario, that target added up to about 1.5 million new units. In response, the province announced a series of escalating targets that would bring Ontario to that goal. This year’s target was pegged at 125,000 new units, and in last month’s fall economic statement, the province not only said it was on track to build just over 81,000 units, but also that it would have to revise its targets downward. Its new forecast reaches a construction peak in 2027 – at a little over 95,000 units.

And while the province’s finance minister Peter has said the government is still committed to the overall target, you can’t help but wonder what’s gone wrong – or whether the target was realistic in the first place.

So what’s gone wrong?

Clearly interest rates haven’t helped. Increases through the latter half of 2022 and across 2023 drove people away from expensive purchases. Rates, of course, have been coming down through this year, and are likely to do so again before 2024 closes, but will those changes be enough to bring people back into the housing market?

But interest rates tell only part of the story. The conversation is multi-faceted.

Part of the problem exists at the municipal level, where red tape is a barrier. Local governments also point to the need to install more water lines and roads – without which new homes are unusable.

Taxes from all three levels of government also stack upon one another to erode affordability.

A report done last year by the Canadian Centre for Economic Analysis found that the tax burden on new home construction is two times higher compared to other sectors of the economy. Taxes on the purchase of a new home have climbed from about 24 percent in 2012 to 31 percent today.

A number of new initiatives are taking shape in response. Last month, federal opposition leader Pierre Poilievre said that if his government were elected next year, it would remove the federal sales tax on homes valued at less than $1 million.

According to the Conservatives, the tax cut would spark 30,000 extra homes being built each year, which would generate more income for construction workers and businesses, and $2.1 billion of revenue for government.

Meanwhile, Housing Minister Sean Fraser recently announced the launch of a $1-billion Canada Housing Infrastructure Fund. The initiative aims to provide communities funding to build or improve the critical infrastructure – such as drinking water, wastewater, stormwater, and solid waste – that will in turn help them build more homes.

Will any of these efforts make a meaningful difference in housing construction in the years to come? Probably, yes.

But even so, who’s thinking about the workforce that’s going to deliver these builds?

This article was written by James Raiswell, Editor of the Construction Comment.

Read More in the November Edition of the Construction Comment here