Province's housing crisis shows little sign of easing
The once-booming housing construction sector in Ontario is facing a deepening slump as higher interest rates force developers to indefinitely shelve projects that were viable just months ago. Industry experts warn the situation could deteriorate further before any recovery takes hold.
"Projects that certainly seemed viable before may not be as viable as they once were," said Scott Andison, CEO of the Ontario Home Builders' Association. "Sales have fallen dramatically, starts are falling, housing supply is going to fall, and it's going to get worse."
Data from Canada Mortgage and Housing Corporation (CMHC) shows housing starts in Ontario's urban areas were down 37% year-over-year in April to just 5,589 units - the lowest level for that month since 2018. Provincewide, multi-unit residential construction has borne the brunt of the decline.
"Sales have fallen dramatically, starts are falling, housing supply is going to fall, and it's going to get worse," Richard Lyall, president of the Residential Construction Council of Ontario, said in an interview with CBC News. "Sometimes you've got to hit bottom before you can start building back up again, and we haven't hit the bottom yet."
At the current pace, Ontario is projected to see only 77,920 housing starts in 2024 – a 15% drop from 2023 and the lowest annual total since 2020, when the pandemic began, according to CMHC projections.
Urbanation, a condo market analysis firm, reported that 60 new projects totalling over 21,000 units in the Greater Toronto and Hamilton area have been indefinitely put on hold amid deteriorating conditions.
"Outside of that brief period in early 2009, new condominium sales haven't been this low since the late 1990s," Urbanation stated.
Higher borrowing costs driven by interest rate hikes are cited as the primary culprit, impacting both buyer demand and developer financing costs. "It's sometimes forgotten that the developers are also having to arrange financing for these large-scale projects," Andison noted.
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The slump has developers and economists urging government action to reduce construction costs, even as a new provincial law enables municipalities to immediately implement development charge hikes rather than phasing them in.
"Who raises development charges and taxes in a housing crisis? This is not the time to allow municipalities to make the new cost of home ownership even more unattainable," Andison stated during recent legislative hearings.
With the slowdown threatening to further derail Premier Doug Ford's housing targets, industry players see no immediate signs of a turnaround on the horizon.
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