How will Canada meet housing targets when there's a construction slowdown?
Industry insiders worry high interest rates, labour shortage and red tape are hampering construction
Canada faces a construction conundrum.
For housing to be affordable for Canadians, the industry needs to build more homes in the near future. Ontario projects 1.5 million new homes will be needed in the province over the next decade, and the Canada Mortgage and Housing Corporation (CMHC) anticipates over 22 million housing units will be needed by 2030 "to help achieve housing affordability for everyone living in Canada."
Rising interest rates, a skilled-labour shortage and what many in the industry call red tape at the municipal level have contributed to a stagnating construction industry over the last number of months.
"That definitely has affected the production of new homes across London and other municipalities," said Sue Wastell, president of Wastell Homes in London, Ont., and head of the Canadian Home Builders' Association (CHBA) since February.
Wastell also cited what was happening in the market early last year, and its impact on Canadians looking for housing.
"We just didn't have enough supply for people to buy and prices escalated very, very quickly because of that," she said.
David Macdonald, senior economist with the Canadian Centre for Policy Alternatives, said competing interests at the government and central bank level are contributing to the problem.
"On the one hand you've got the federal government — and to some degree, provincial governments — pushing for more housing to be built, and on the other hand you've got the Bank of Canada" and its raising of interest rates.
"In so far as we're relying on the private sector to build a lot of that new housing stock, that's a lot less likely to happen now than it was a year ago, given much higher interest rates."
Red tape slowing building approvals
Over the last 10 to 15 years, the time it takes to build a single-family home in London has gone from 90 days to around a year, said Wastell, who blames new layers of red tape at city hall.
Wastell Homes is building two separate townhouse complexes in London and a 68-unit condo building in Port Stanley.
"We used to be able to use pre-approved plans ... and submit a permit application in under a week," she said. "Today, each home has to be individually drawn, engineered, heat loss calculated, truss designed, engineered stamped and more, which adds at least a month or more to just the start of the process."
In Ontario, municipalities are required to complete a permit application for a house within 10 days, or 30 days for a more complex building. However, if an application is sent back to the builder, all bets are off, said Wastell.
"If there is any detail missing or in question on the application, the permit is taken off the 10-day provincial timeline, and when resubmitted has no timeline for the city to get it back to you," she said.
"As of January this year, we have seen a reduction in permit applications for small to medium residential buildings, including single and semi-detached," said Peter Kokkoros, City of London director, building and chief building official. "Complete applications for those types of permits are being issued with minor delays."
The city has updated it online permit application portal in an effort to streamline the process, said Kokkoros.
"With these improvements, we are hopeful missing documentation will be minimized and can reduce delays in permit processing."
Is the tide turning?
The federal government is launching a new Housing Accelerator Fund this summer, which according to the Canada Housing and Mortgage Corporation (CHMC) will provide "incentive funding to local governments encouraging initiatives aimed at increasing housing supply."
Wastell is optimistic that means development applications will be handled at a quicker pace.
It's also encouraging that interest rates have remained stable since January, said Wastell.
"We're hopeful that our builders are going to start seeing lots of action coming up over the next few months."
A shortage in skilled labour, however, is helping push labour costs and the cost of construction way up, said John Van Lagen, president and co-owner of Joe's Carpentry Van Lagen Homes in Norwich, Ont.
Van Lagen's company specializes in renovations and additions, and usually has about a dozen projects going on at any one time. He's still busy, but is not booking as many jobs compared to last year. For him, that's been a good thing.
When the industry was booming last year, demand was so high and prices were "kind of went crazy," said Van Lagen. "We needed to slow down the market a bit so the supply chain could catch up with materials."
LISTEN | CHBA's Sue Wastell speaks to London Morning about the housing dilemma in Canada: