A housing development with new houses and lots being prepared for construction in Langford, B.C., on Thursday, May 30.DARRYL DYCK/The Canadian Press
As governments in British Columbia and Ontario race to tackle a deepening housing crisis, an analysis of recent data shows that while B.C. has jump-started a fix, Ontario lags behind other provinces, including those in the Atlantic region.
New housing starts and development permit numbers show British Columbia is one of the leaders in the number of new housing units it is building relative to the population, says Ottawa-based economics professor Mike Moffatt, senior director of policy at the Smart Prosperity Institute.
Other top performers are Alberta and Atlantic Canada.
“Ontario and the Prairies are lagging well behind,” Mr. Moffatt noted.
Last month, mid-year figures released by Canada Mortgage and Housing Corporation showed that B.C. housing starts were down eight per cent compared with the previous year. Ontario’s showed a 17 per cent decrease in starts. Housing starts are defined by CMHC as projects in which the foundation has been poured and the building is emerging from the ground.
Mr. Moffatt’s analysis shows that while B.C. is beset with several of the same difficult circumstances as Ontario, the outcomes are very different.
While B.C. built 2,300 fewer units than the 25,450 built in the same period the year before, this year’s housing starts are still above the five-year average of 45,497 for the year (which works out to 22,748 for a half year.) B.C.’s numbers drop this year only because the previous year, with just over 50,000 units, was a record year.
Ontario’s housing starts, which, based on population, have been lagging B.C. and many other provinces, saw 6,500 fewer than the previous year’s 45,000 for the same period. The figure marks a continued decline from 2021, when Ontario saw almost 100,000 starts. The five-year average in Ontario is 91,000 starts.
Mr. Moffatt has been banging the drum steadily about Ontario’s low level of housing productivity in the last couple of years, warning that it comes nowhere near to matching the province’s population growth and signals more housing problems to come.
British Columbia and Atlantic Canada are doing especially well when comparing the rate of housing starts with the rate of population growth, said Mr. Moffatt.
There’s also no strong indication that B.C. is about to slow down, even though, like in Ontario, many major condo projects have been put on hold in the last two years.
Another provincial data set in B.C., this one on building permits, has been posting extremely high numbers in the past five years, with no sign of a slowdown. Building permits indicate the stage of construction that typically precedes the “start” stage by up to a year.
B.C.’s January-to-May numbers on building permits shows a 15.4-per-cent increase in the number of units permitted over the same period in 2023 – 22,458 in the first five months.
That’s double the Canadian increase for that period.
And those high numbers come on top of two bumper years for the province, with permits for 54,000 and 49,000 units in 2022 and 2023.
Analysts note British Columbia faces many of the same obstacles to building more housing that Ontario does. It has some of the highest land costs in the country, which is often one of the first deal breakers for any builder contemplating a new project. Metro Vancouver has seen the evaporation of the offshore investors who helped fuel its earlier explosive condo boom.
As well, those watching the changes to regulations on rentals have warned that B.C. is making investment in new rental construction more risky with its stringent rules limiting landlords’ ability to raise rents and its recently introduced policy requiring three to four months’ notice to evict a tenant in the case of a sale.
But economists, developers and housing analysts interviewed by The Globe say British Columbia has had a head start on tackling the housing problem.
The provincial government, as well as municipal governments in the Vancouver area, moved earlier than other provinces to give developers incentives to build rentals because the housing crunch hit the West Coast earlier.
The B.C. government poured significant money into social housing since the NDP was elected in 2017, and also aggressively pushed cities to allow more kinds of “missing middle” housing – fourplexes, rowhouses, laneway houses – everywhere. Although Toronto has recently started allowing laneways and multiplexes, Ontario’s Conservative government has nixed the idea of requiring cities to allow fourplexes in any residential zone.
Economist Bryan Yu at Central 1 Credit Union noted that although starts for condo projects are down by 20 per cent in B.C., rental-project starts are rising.
He believes that early government efforts in B.C. in general and Vancouver in particular – Vancouver started more than a decade ago to look for ways to encourage developers to build rentals – has put the province on a different footing from others.
“We have been at that forefront of trying to boost affordable housing for a while. I think all of that comes together to create the push.”
Derek Fenton of Zenterra Developments, who is also vice-chair of Homebuilders Association Vancouver, noted that in Toronto, 70 per cent of condo buyers are investors, making projects there less likely to go ahead when investors pull back. In B.C., investors are buying 50 per cent of pre-sale condo units, and those projects are going ahead at more consistent rates.
That side of the housing-construction market has been boosted by federal and provincial incentives for rental builders, mainly in the form of low-interest financing.
“Definitely in some of the inner municipalities, there’s been a big uptake on rental because of that,” Mr. Fenton said.
Still, analysts worry a slowdown will soon hit British Columbia like it has Ontario.
High interest rates, labour costs and construction material prices are structural problems that aren’t going away. Permitting times in city halls haven’t sped up sufficiently, and there is no agreement on a different funding model to build needed infrastructure for new neighbourhoods, meaning developers must pay.
Recently, it’s not just condo projects that are being put on hold in B.C. Developers of large rental projects are also showing signs of stress.
Bosa Properties, a large Vancouver-based firm that weathered the 2008 recession successfully and has projects in three major U.S. cities, recently sent a letter to Burnaby council saying it was abandoning its plan to acquire a site to build 1,200 rental units because of city policies that were making it financially undoable.
“The cost to build each affordable unit was $350K greater than the value of the unit, which translated to a $90M loss over the entire phased development,” explained Kyle Wright, Bosa’s senior director of development.
“This loss in value ensures the rental project overall can’t achieve a satisfactory profit margin / yield on cost, meaning builders like Bosa Properties can’t justify the investment in new rental housing.”
Mr. Wright also stressed that the city’s significantly increased development-cost charges contributed to the decision.
Mr. Yu and other builders say that example is a harbinger of what is bound to come.
“That pipeline starts to dry,” said Mr. Yu.
Editor’s note: (Aug. 21, 2024): A previous version of this article inaccurately described trends in British Columbia and Toronto. According to Derek Fenton of Zenterra Developments, 70 per cent of condo buyers in Toronto are investors, making projects there less likely to go ahead when investors pull back. B.C. builders see investors buying 50 per cent of pre-sale condo units. This version has been updated.