High land prices, inter­est rates and mate­r­ial costs erod­ing hous­ing affordability

Excerpt from an arti­cle by Gail Swain­son, Real Estate Reporter, Toronto Star

Ontario’s once red-hot home con­struc­tion mar­ket will expe­ri­ence its sec­ond straight cool-down year in 2007, the pres­i­dent of the Ontario Home Builders’ Asso­ci­a­tion told an indus­try con­fer­ence last week.

“I expect that in the com­ing year, while the hous­ing mar­ket will still be healthy, we are in for a bit of a soft land­ing,” Brian John­ston told the 19^th Build­ing and Ren­o­va­tion Forum at Markham’s Hilton Suites Con­fer­ence Centre.

John­ston said the antic­i­pated drop in hous­ing starts across Ontario this year is sparked in part by devel­op­ment land short­ages, ris­ing inter­est rates and the soar­ing cost of build­ing materials.

Although the new hous­ing mar­ket is sev­eral years past its “cycli­cal peak” in 2003 and 2004, hous­ing starts are still – and will remain – way ahead of his­tor­i­cal aver­ages, he said.

In his fore­cast at what 2007 would hold for the indus­try, John­ston rolled out a num­ber of pre­dic­tions, includ­ing 69,000 build­ing starts in Ontario. Starts last year hit 75,000.

In the Toronto area, hous­ing starts declined 11% from 2005 to 2006, accord­ing to a Canada Mort­gage and Hous­ing Corp. report issued last week.

Last year, 37,080 new homes were started in the GTA, com­pared with 41,596 in 2005, the fed­eral hous­ing agency said. CMHC con­sid­ers a home “started” when the foun­da­tion is poured.

The decrease was blamed on higher prices for entry-level homes such as sin­gle detached, semi-detached or row hous­ing.

The province’s Places to Grow doc­u­ment, which out­lines growth plans for Greater Toronto and beyond, will also have a sig­nif­i­cant impact on the sup­ply of afford­able hous­ing.

“With almost four mil­lion peo­ple expected to set­tle in the Greater Golden Horse­shoe by 2031, Ontario has to invest in infra­struc­ture,” he said. “To ensure a high qual­ity of life along with a pros­per­ous econ­omy, the province must con­tinue to sig­nif­i­cantly increase invest­ments to expand and repair our exist­ing infrastructure.”Greater Toronto’s “poster child for a lack of timely plan­ning” is York Region, which is expe­ri­enc­ing a back­log of build­ing appli­ca­tions result­ing from slow­downs in the con­struc­tion of sev­eral links to the Big Pipe sewer system.

Com­mu­nity oppo­si­tion to any expan­sion of Greater Toronto’s aging elec­tric­ity grid is also of great con­cern to builders, he added.

“Unfor­tu­nately, some provin­cial leg­is­la­tion designed to speed up and sim­plify the res­i­den­tial build­ing process isn’t work­ing as it was intended and that’s lead­ing to frus­tra­tion and costly delays,” he said.

Bill 124 is an amend­ment to the province’s build­ing code that was meant to stream­line the process, among other things. The leg­is­la­tion kicked in Jan. 1, but many in the build­ing indus­try warn the changes will lead to even more delays because many munic­i­pal­i­ties aren’t ade­quately prepared.According to OHBA sta­tis­tics, Ontario’s con­struc­tion indus­try employs more than 360,000 work­ers and is respon­si­ble for some $25 bil­lion of the province’s econ­omy, or 5.4% of its GDP.

About 62% of Cana­di­ans own homes, up from 60% over the last five years.

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