Ontario home construction levels rising, but still far from 1.5 million target

The pace of new home construction is accelerating in Ontario, although it is still far from the levels needed for the government to deliver on its promise to build 1.5 million homes by 2031, the budget released Tuesday shows.

In last year’s budget, housing construction projections had Ontario building fewer than 80,000 new homes in 2024, but that number is now expected to be nearly 88,000.

Those numbers are expected to continue rising slowly but steadily over the next few years, up to 95,800 in 2027, according to budget projections based on the average of private sector forecasts.

However, Ontario needs to build at least 125,000 homes this year, increasing to at least 175,000 per year to reach 1.5 million homes, as the early years of the 10-year period also recorded lower levels than needed.

By the Progressive Conservative government’s own count, it actually met 99 per cent of last year’s target of building 110,000 homes. However, this is only because they started counting long-term care beds as homes. Almost 10,000 of them were created last year.

Finance Minister Peter Bethlenfalvy acknowledged that housing starts are not where he expected, but said high interest rates are a major factor in slowing construction.

“That too shall pass, and what we will not waver on is our commitment to finding more ways to get more houses,” he said.

The budget contains $1.6 billion in new money for infrastructure to enable housing construction. Municipalities will be able to use the funds to build infrastructure such as water lines and roads, something they say has been lacking, which has been an obstacle to the construction of new homes.

Municipal Affairs and Housing Minister Paul Calandra is expected to soon introduce new housing legislation aimed at increasing supply, although the premier has already flatly ruled out automatically allowing quads in municipalities across the province.

Premier Doug Ford has criticized the four-, six- or eight-story buildings that are popping up in neighborhoods, although four-unit quads are not necessarily four stories.

In order to build more rental housing, the government is allowing municipalities to offer a reduced municipal property tax rate on new multi-residential rental properties.

The budget says Ontario will allow all single-tier and higher municipalities to tax vacant homes, which the government says will increase housing supply. Currently, Toronto, Ottawa and Hamilton have the authority to impose such a tax.

The province is also committing an additional $152 million to housing to help people facing homelessness and mental health or addiction issues.

In the resale market, high interest rates have a significant impact, the budget shows. Resale sales were 12.3 percent lower in 2023, following a 31.9 percent drop in 2022, reaching the lowest sales volume in more than 20 years, the budget said.

The resale market is expected to recover in 2024, with growth of around four per cent, followed by a 16 per cent jump in 2025, the government said in the budget.

The average monthly cost of maintaining a mortgage is now about $4,600, well above the previous peak in the 1980s when adjusted for inflation.

This report by The Canadian Press was first published March 26, 2024.

Leave a Comment