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L&rsquo ;Can Ontario build 1.5 million homes by 2031? | Housing crisis in Toronto

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There were fewer housing starts in Ontario last year compared to 2023. (File photo)

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The Ford government has promised that 1.5 million homes will be built in Ontario by 2031, but industry players warn that much must change to have any hope achieve this target.

Nearly 2 years ago, the Ontario Progressive Conservatives tabled a bill to speed up the construction of houses and condominiums. The government wanted to force municipalities to speed up the process of approving building permits.

It is clear that these hopes have not yet materialized : there were 85,770 housing starts in Ontario last year, according to the latest figures from the Canada Mortgage and Housing Corporation (CMHC), which is 6,115 fewer than in 2022.

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Ontario Premier Doug Ford wants still have 1.5 million homes built by 2031. (Archive photo)

And it's not likely to get better. CMHC estimates that a majority of projects started last year were financed when interest rates were more advantageous.

Toronto's housing crisis

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Toronto housing crisis

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On the promoter side, when interest rates increase, the financing costs for starting projects with banks also become higher, so the projects are becoming less profitable than before, says CMHC economist Francis Cortellino.

Economists expect the Bank of Canada to lower its key rate later this year, which would have the effect of lowering interest rates. But these will remain high, estimates senior economist at Desjardins Marc Desormeaux.

Compared to the last decade, rates will still be high, according to our forecasts. Then, the rates will be less stimulating and that will be an issue for several companies.

A quote from Marc Desormeaux, senior economist at Mouvement Desjardins

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Marc Desormeaux is a senior economist at the Desjardins movement. (Archive photo)

However, certain regions in Ontario are doing well. The cities of Kingston and Guelph managed to increase the number of housing starts compared to the previous year , according to CMHC data.

At the heart of this success story in Guelph is a deliberate planning strategy focused on stimulating the construction of diverse housing: duplexes, townhouses, and mixed-use buildings, where there is commercial space on the ground floor and apartments on the upper floors.

The city council in April approved a complete overhaul of its zoning system to allow the construction of structures other than single-family homes. However, this regulation is the subject of an appeal before the Ontario Land Planning Tribunal.

Guelph was well ahead of the province's policies and the credit for our growth and construction starts absolutely does not belong to the province, says municipal councilor Dominique O'Rourke.

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The adoption of Bill 23 has a financial impact on the municipality of Guelph, according to municipal councilor Dominique O'Rourke. (File photo)

The provincial government is putting obstacles in the way of cities by preventing them from collecting development charges from developers, says the councilor. However, this income is essential for the development of the territory associated with these new housing.

New development is going to need sewers, sidewalks, roads, public transit, she said. We modify and cut the amount we can collect from developers to pay for growth and then it falls on property taxes. So, that’s frustrating.

The Ontario Housing Minister's press secretary admits by email that the province must do more to achieve its goals.

We sought input from our municipal partners last fall and are working to implement the remaining recommendations based on their feedback, says Alexandru Cioban.

However, market forces remain outside the control of municipal and provincial governments. Interest rates will likely remain high throughout the year and the construction labor shortage continues to be felt.

The province does not have to wash its hands of this, insists the president of the Ontario Homebuilding Council, Richard Lyall.

Housing is like a supertanker. It doesn't stop very quickly, it doesn't start very quickly, even if you can shock the system. It is absolutely imperative that the federal and provincial governments, whatever additional changes they need to make to housing, do so this spring.

A quote from Richard Lyall, Chair of the Ontario Home Building Council

Ontario and Canada worked together in 2023 to ease the burden on developers, by exempting all construction of new rental properties from the Goods and Services Tax (GST). The federal Ministry of Housing is increasing agreements with cities to stimulate housing densification in exchange for millions of dollars.

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At the current rate of construction, the country's housing stock is expected to increase by just 2.3 million units by 2030 according to CMHC, short of the target of 3.5 million new homes.

But other levers are always available to governments, believes Mr. Lyall, such as exemption from this same tax for young households buying their first home, or the construction of modular units that can be installed where necessary.

It is particularly suitable for student housing, transitional housing, senior housing. It's possible to build the entire unit, fully furnished with appliances, ship it and install it on a site, he says.

All types of housing are good to build, because the supply must be increased at all costs, at all prices, according to him. Even luxury buildings would have their place, he believes, because the people who move there will leave behind more affordable buildings for those with lower incomes.

Any accommodation is good to have, even luxury accommodation, because anything that increases supply has an effect, he says.

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Richard Lyall is Chairman of the Board of Ontario residential construction.

The urgency to act is real, and inaction could have consequences, says economist Marc Desormeaux.

C&#x27 ;it is clear that if we look at all the indicators, the economic forecasts, the construction of residential buildings will be difficult for the next few years, he says.

But even if we encounter difficulties due to macroeconomic factors, we must never stop our efforts to accelerate residential construction. Affordability needs to be improved, and the reputation of the province and even Canada as a welcoming and prosperous place to live depends on more residential construction.

A quote from Marc Desormeaux, senior economist at Desjardins Group

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