‘Should be truly red-faced’: Ontario housing starts fall, and they could drop again

The Ford government is, again, painting a gloomier picture for housing construction in Ontario than it had originally projected, revising down already low estimates it published at the beginning of the year.

The Fall Economic Statement, tabled on Wednesday, shows the government is expecting housing starts to fall below expectation every single year until 2027, as home building grinds to a halt.

While the government originally projected nearly 88,000 housing starts in 2024, the latest update shows the government is now projecting 81,000 starts — falling well below the government’s own target of 125,000 in 2024.

In 2022, the government announced it planned to build 1.5 million new homes by 2031. To hit that goal, it needed an average of 150,000 new housing starts every year.

The Canada Mortgage Housing Corporation, which counts housing starts, defines the term as when concrete is poured on the project. Municipalities, however, dispute the CMHC’s data suggesting some homes are undercounted.

The projections, which are based on private sector forecasts, show Ontario is now expected to start building 356,000 homes over the next four years compared to the 370,000 the government initially projected over the same period of time.

“While progress is being made, homebuilders across the province continue to face a challenging economic environment, including elevated interest rates that impact the pace of new home construction,” the fall economic statement said.

The 2024 budget in the spring estimated the government would fall well short of that goal this year with 87,900 new starts. The province lowered that expectation to 81,300 in the new figures released Wednesday.

Ontario has set itself a modified target of 125,000 new housing starts for this year.

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In total, for 2024 to 2027, the government knocked 14,400 housing starts off its expectations. On average, over the next four years, Ontario is now projecting just 89,075 new housing starts every year — instead of the 150,000 average it needs.

“Their housing starts are embarrassing,” NDP finance critic Catherine Fife said on Wednesday. “This is a government that should be truly red-faced in the way that they’ve missed their housing starts.”

Government officials say even though interest rates have been coming down, it takes a while for that decrease to have an impact. They say they still expect to meet the 1.5 million homes target.

In a bid to get closer to its goal last year, the province lowered its annual targets and expanded its definition of a new home.

The government started counting new long-term care beds as homes, along with basement units and garden suites, and dropped its goal to 110,000 new homes for 2024.

Instead of hitting an average of 150,000 per year, it suggested it could scale up housing starts from around 110,000 to hit highs of 175,000 per year before 2031 arrives.

“Just last year, we hit our targets on housing starts, we hit numbers that we haven’t seen since the late ’80s and early 1990s,” Finance Minister Bethlenfalvy said on Wednesday, referencing the revised goal.

“Interest rates have had their impact, and that’s cyclical, but we’re not going to relent on putting in place the infrastructure necessary to get more built.”

The Building Industry and Land Development Association, which lobbies on behalf of developers, said that continuing slow housing presales and the persistently high cost to build mean things could get worse.

“I think it’s a warning sign as well — the bottom line is the cost to build new homes is just too high,” BILD president and CEO Dave Wilkes told Global News.

He said he was worried that, without a reduction in development taxes and fees charged by governments, housing starts could slip further and Ontario move further from its goal.

“We just look at the sales numbers. Today’s sales are tomorrow’s starts and today’s starts are weak. I think that the equation can be done in a pretty straight line as a result.”

The government has established various funds worth several billion dollars to help spur home construction, including incentives for municipalities and money to get housing-enabling infrastructure such as water and wastewater lines built.

The spring budget contained $1.6 billion in new money for housing-enabling infrastructure. Municipalities have described a lack of new water lines and roads as a hurdle to building new housing, and they can use the funds for such projects.

Even by 2027, the furthest into the future the government has projected and the year it has revised its estimates downward the least, Ontario only expects to start 95,300 new homes.

— with files from The Canadian Press

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