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Co-Operation Critical to Solve Worsening Housing Crisis

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While substantial efforts have been undertaken by various levels of government to tackle the severe housing affordability and supply crisis, latest indicators show the situation may be getting worse.

Recently, we learned from a report by RBC that only 26 per cent of Canadians could afford a single-family home right now, down from 40 per cent four years ago.

The figure is even worse for condos, as 45 per cent of households can afford to own a condo apartment based on their income, compared to close to 60 per cent in 2019.

Soaring interest rates and home prices have taken a toll and reduced the number of people who can afford to buy.

Of the provinces, Ontario and B.C. are in the worst shape. In Toronto, it takes 84 per cent of a median household income to cover housing costs, while in Vancouver, it’s reached a whopping 102 per cent. We consider housing affordable when 30 per cent or less of income is used to cover costs.

Reports Show Need for Housing

The Toronto Regional Real Estate Board reports that home prices are still elevated from pre-pandemic levels, with the average price of a home at $1.08 million, compared to $843,600 four years ago. 

A retrospective by CMHC summarizing insights gained from various reports in 2023 shed some light on the difficulties created by the crisis.

A rental market report revealed patterns of increased turnover in urban centres, suggesting that job mobility, lifestyle changes, or the pursuit of more affordable housing options underscore the need for a more nuanced approach in addressing the challenges faced by both tenants and landlords.

Another report indicated there is a need for 3.5 million more homes than is expected to be built by 2030. With the increasing population and pent-up demand, it just highlights the urgency of the situation.

The country’s population grew by more than 430,000 in the third quarter of 2023, setting a record. It’s the fastest pace of growth in any quarter since 1957 – most of it fueled by immigration. This only exacerbates the need for more housing.

Affordable housing crisis - a hand holding a magnifying glass.

Much More Work Remains

The federal and provincial governments have stepped up their efforts to address the problem, but there is still a long way to go.

The feds recently announced a new Department of Housing, Infrastructure, and Communities, which will replace what is currently Infrastructure Canada. This move makes perfect sense, as the housing crisis isn’t just about providing shelter for Canadians. It’s much more complicated than that. To support housing and rental units, for example, you need properly funded infrastructure. 

The feds also announced $471 million from Ottawa’s $4-billion Housing Accelerator Fund to build denser housing city-wide in Toronto, speeding up development approvals and revitalizing public housing communities.

The provincial government is also taking steps to build more homes. It recently announced it is scrapping its portion of the HST on purpose-built rental construction to coincide with the feds’ cutting the GST. We are hopeful that the same can be applied to market-built housing which faces similar headwinds.

The province is also looking into developing a modular housing framework that would ultimately boost the offsite manufacturing of homes.

And importantly, the province is engaging with municipal partners on their ability to fund growth-related infrastructure that will support the construction of more homes, including a review of the five-year phase-in of development charge increases and planning application fee refund framework. 

Municipal Affairs and Housing Minister Paul Calandra has indicated the province will “continue to work with our municipal partners to ensure that they have the tools and revenue streams needed to get shovels in the ground.”

The goal of the consultations with individual municipalities will be to inform potential legislative changes for the government’s upcoming Housing Supply Action Plan that would enhance municipalities’ ability to invest in housing-enabling infrastructure such as water, wastewater, and roads.

Governments Must Work Together

To move the needle further, however, will require the feds and province – and the City of Toronto, in particular – to be on the same page.

This will be no easy task, as we have the Conservatives provincially, the Liberals federally, and an NDP mayor in charge in Toronto. The three parties don’t often play well together but must do so to deal with the crisis. The residential construction industry will certainly be there to help in any way we can.

Ottawa has the necessary tools to make it happen. The federal government controls many of the tax levers. They collect 39 per cent of the taxes on new housing but only put 7.1 per cent back into municipal infrastructure. They are still a long way from sorting out some pretty fundamental problems.

Many of the housing policies are still an uncoordinated mess, and there remain serious practical problems. Delays in approvals and infrastructure availability are still affecting projects proceeding. 

While there have been positive developments, the supply numbers tell the story. Interest rate cuts coming in 2024 will help those seeking to buy homes. However, co-operation between governments and the industry is critical to come up with innovative solutions to remedy the problem.

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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