‘Not a Chance’: Construction Experts Say Government’s Bid to Build Nearly 3.9M Homes by 2031 Unrealistic

Houses under construction in Toronto in a file photo. (Graeme Roy/The Canadian Press)

The federal government’s promise to build nearly 3.9 million new homes by 2031 is unrealistic and unachievable, construction experts told MPs.

“Right now, we’re staring into a pit,” Residential Construction Council of Ontario president Richard Lyall told the House of Commons human resources committee this week, which was first covered by Blacklock’s Reporter.

“When cranes come down, they’re not going back up. We’re headed down in a big way and our sub-trade pipelines are dry. It’s drying up.”

When asked if the federal target of constructing 3.87 million new homes by 2031 was realistic, Mr. Lyall was blunt.

“Not a chance,” he replied, adding that new housing starts are on a downward trend because of high financing costs and development charges.

“We’re slowing again,” Mr. Lyall added. “We have hundreds of framing crews sitting at home now.”

The GST holiday for apartment builders will not go far enough to boost construction rates, says Canadian Home Builders Association CEO Kevin Lee.

“It’s very expensive to build right now,” said Mr. Lee, who also appeared before the committee this week.

Mr. Lyall agreed, saying that the tax holiday alone does not address the issue. He said the country is in “a crisis moment” that is not just about housing, but about growth management.

“The data points are truly shocking when you look at them,” he said.

Affordable Housing

Ottawa has promised to build 3.87 million new homes by 2031, which would accelerate the construction rate to never-before seen levels in Canada. Construction of the promised homes in addition to the country’s current construction rates would necessitate 731,500 starts each year.

The federal government included $8.5 billion in new spending for housing in its 2024 budget. It has also earmarked $500 million to buy public land from provincial and municipal governments on which it hopes to build 250,000 new homes by 2031.

The funding is a bid to address the affordable housing crisis which has plagued the country for several years but has worsened since the COVID-19 pandemic. But funding alone is not a solution to fixing the crisis, Mr. Lee said.

“There’s often a call for more funding for affordable housing,” Mr. Lee said. “And while that funding is important, I’m here to tell you that you will never fix the affordable housing issue with funding alone. There are simply not enough tax dollars to go around.”

The affordable housing crisis has been “decades in the making,” Mr. Lyall said, adding that “excessive red tape,” a lack of coordination between the three levels of government, and an inefficient approval process has exacerbated the current situation.

“We’ve been calling for over a decade to modernize and digitize our approvals processes for both development and building,” he told the committee. “And that’s been very, very slow. In fact, we’re well behind other jurisdictions. This can’t be left to municipalities. They don’t have the individual expertise. They don’t have the economies of scale to deal with that.”

Rising Costs

RBC assistant chief economist Robert Hogue, who also testified before the committee, said the housing crisis in Canada could soon reach “even more alarming levels” if the government and other stakeholders don’t increase construction to meet demand.

When demand outpaces supply, housing costs rise, he said, adding that costs rose by 50 percent in two years, placing “tremendous stress on home buyers.”

“It had impact across the entire spectrum pushing a lot of people into the rental space” which, in turn, raised rental rates to the point of being unaffordable for many, “pushing them into social housing,” Mr. Hogue said.

The government needs to be much more “nimble” in dealing with supply issues, said Mr. Hogue, who recently wrote a report focusing on the housing crisis.

The report showed that if building alone was relied on to meet future demand, yearly housing completions would need to rise from the current three-year average of 218,000–320,000 between now and 2030.

While the RBC report identified high ​​interest rates as an ongoing affordability issue, it is not the only reason for fewer new builds. The report pointed to the construction industry’s “capacity issue,” noting that the level of housing construction required “is far above anything ever achieved in Canada.”

Mr. Hogue said the construction sector’s labour pool must be expanded to meet demand but also described lowering the cost of building new housing as essential.

Building costs have soared due to the inflated price of materials, he said. When added to labour costs and government charges, which can account for more than 20 percent of the construction cost, the final price tag is a high one.

“Efforts should be dedicated to lower or at least contain every cost item,” Mr. Hogue added.

Municipal development charges are also elevating costs, Mr. Lyall said, noting that charges in the GTA sit at 31 percent and at 30 percent in B.C.

“That is by far the highest in North America and it’s not sustainable,” he said. “It particularly hits the first-time buyer the most. We effectively tax housing like alcohol and tobacco. It’s like a sin tax. It doesn’t make sense.”

Conservative MP Scott Aitchison said development charges have risen roughly 400 percent in the past decade.

“Who pays the development charges?” he asked Mr. Lyall.

“It’s a tax paid by consumers,” Mr. Lyall responded. “It’s regressive, it’s not income tested, and the people who get hit the hardest by those taxes are the ones who can least afford housing which is very un-Canadian among other things. They’ve been out of control.”