Leading to double digit price hikes beyond 2022
Developers are ready, willing and eager to build
Richard Lyall
Canadian Real Estate Wealth
Ontario’s housing crisis is real – and hurting us economically.
Lack of affordable housing is costing the Greater Toronto Area up to nearly $8 billion annually – or almost $38 billion over a five-year period, according to a recent report.
It affects us in other ways as well.
As a result of high prices for housing, talent is leaving our cities – and country. Young people are unable to get into the housing market and start families.
At a recent housing summit sponsored by the Residential Construction Council of Ontario (RESCON), we heard that housing prices will continue to rise.
Jason Mercer, chief market analyst at the Toronto Regional Real Estate Board, indicated in a presentation at the summit that a resurgence of growth through immigration will continue this year and in 2023, leading to double-digit price hikes beyond 2022 mainly due to lack of listing inventory.
In 2021, there was a record level of sales activity and the average sale price of a home in the Greater Toronto Area moved above the $1-million mark.
Last year, there was a resurgence of growth driven by immigration, Mercer said, and that will continue in 2022 and 2023.
As he noted, the flip side of that is all these newcomers will need a place to live.
In light of this information, and that fact that we are in a housing crisis here in Ontario, it is ludicrous to suggest that developers would sit on approved housing projects in order to drive up prices. However, that was the inference in a staff report presented recently to Mississauga city council.
The report suggested easing building permissions won’t result in enough new homes to push down costs as staff have found that developers phase growth to manage any downward pressure on unit prices.
That claim is absurd for a number of reasons. There are myriad reasons that projects are not built immediately.
First, building a housing development is a complicated process. There is a labyrinth of approvals that must be sought. Developers may get zoning approved but it can take years before shovels go in the ground. Design plans may still have to be tweaked and building permits must be approved.
Second, any good business plans for the future. Developers must ensure they have an ample supply of land that is properly zoned, approved, and ready to build on when they are ready to proceed. Just because land for a housing project has been zoned, does not mean the venture is ready to roll.
Third, developers must ensure their operations are sustainable from year to year. They don’t build everything out in one year and then wonder what’s next. Building out all developments without planning for the future would be like a grocery store selling out its entire stock with nothing coming in.
Fourth, there are other crucial considerations that go into building a housing development such as revenue streams and availability of materials and labour. Therefore, careful, forward-thinking planning is necessary.
Developers are keen to get their projects built but are often stymied by red tape and restrictive zoning. When they do get zoning approved, it still takes time for them to begin work on housing developments.
At the recent housing summit, we heard that the federal and Ontario governments, provincial party leaders and big city mayors are aligned on the severity of the housing crisis. Importantly, all the politicians who spoke at the event agreed that urgent action must be taken to solve the problem.
This is the type of thinking that is needed to spur more housing. Developers are certainly not the problem.
Developers agree and are excited about recommendations put forward by a provincial Housing Affordability Task Force. The suggestions are a blueprint to build 1.5 million homes over the next decade.
Rest assured, developers are ready, willing and eager to build.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at [email protected].
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