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Firm Political Action Needed to Tackle the Housing Crisis

A house in the middle of a pile of money.

They say the future is what we make it. I’m hoping government leaders at all levels will heed that sage advice and work with the residential construction industry in 2024 to make it a good year for housing.

Much will depend on whether the leaders can set aside their political differences, at least temporarily, and focus on the crisis at hand. With housing supply and affordability expected to dip even further this year, we need those in the political upper echelons to work in unison on the problem.

Last year was a painful year for new housing construction. The latest report by CMHC revealed that the annual pace of housing starts in Canada fell 22 per cent in November from a year earlier – this at a time when we need housing the most. In Toronto and Vancouver, starts were down 39 per cent.

A number of residential construction projects have been delayed or cancelled because of the tumult of 2023 and corresponding rise in interest rates. Meantime, the cost of housing continues to rise.

The aggregate price of a home in Canada is expected to reach $843,684 in the fourth quarter of 2024, a 5.5-per-cent annual increase, according to Royal LePage. 

The leading assumption is that interest rates will come down this year. However, action is needed on other fronts as well.

Three Ways to Solve the Problem

Governments need to tackle the ridiculous red tape, along with the excessive fees, taxes, levies, development charges, and bureaucracy that are choking the housing supply.

Governments must also reduce fees that add to the price tag on new housing. They account for 31 per cent of the cost of a new home. Development charges, in particular, are skyrocketing in cities like Toronto.

The feds collect the lion’s share of the taxes on new homes – a whopping 39 per cent – but only invest about seven per cent back into infrastructure to support the construction of new housing. This must change.

A helpful fix would be for governments to cut the GST and HST on owner-occupied housing, same as what the federal and provincial governments did for purpose-built rental buildings, at least for first-time buyers.

Consideration should also be given to allowing RRSP funds to be used for the purchase of principal residences by domestic first-time buyers and possibly those who are downsizing. This would enable more buyers to enter the market.

A house under construction with wooden scaffolding.

The cost of market housing is out of reach of many middle-class working folks. First-time home buyers, in particular young people, are priced out of the market. For them, there is no Canadian dream.

The development approvals process, meanwhile, is in dire need of an overhaul. Governments must work on streamlining, speeding up, and simplifying the process and embracing and investing in offsite construction as a means of speeding up the construction of new homes.

We need a modernized, digitized, and standardized approvals process. Presently, systems are fragmented and piecemeal. Notwithstanding all the talk of streamlining the system, the situation seems to have paradoxically worsened. Modernization is proceeding at a glacial pace. We must adopt new technology to improve our development approvals process.

Governments should also look to promoting offsite construction as a means to build more housing. At RESCON, we have been encouraging government leaders to provide financial assistance and tax breaks to incentivize companies to build more modular housing manufacturing plants as well as provide funding so the industry can keep pace with new technology and building techniques. 

Offsite construction could be one of the pieces to the puzzle as it is a quick way to boost supply. We would manufacture new homes the same way we mass produce vehicles.

Storm Clouds Have Been Gathering

We at RESCON have seen this perfect storm coming for some time now and raised the alarm bells about excessive add-ons, as well as the stubbornly complicated development approvals systems. Now, the chickens have come home to roost.

For years, successive governments have applied band-aid solutions, but the housing crunch is now hitting home. It will take some time to fix. Residential construction projects that are started today can take years to complete. 

However, the silver lining in all of this is that political leaders are now listening. While the task is daunting, we have an opportunity to chart a new course. We must start immediately with serious action.

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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