Housing starts in Ontario drop to 2018 levels

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Housing starts across Canada fell by one per cent in April, according to the latest figures from Canada Mortgage and Housing Corporation (CMHC).

The six-month trend in housing starts decreased 2.2 per cent from 243,907 units in March to 238,585 units in April.

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Canada’s largest three cities — Toronto, Vancouver, and Montreal — all recorded a reduction in housing starts, with Toronto seeing the largest decline year over year at 38 per cent. Vancouver recorded a 30 per cent drop while Montreal saw a three per cent decline.

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According to CMHC, the decline is mainly due to a significant drop in multi-unit housing starts, which fell by 11 per cent, even though single-detached housing starts saw a slight increase of 3 per cent.

Construction began on 5,589 homes in Ontario, which is fewer than in any April since 2018. Here’s what to know.

How have housing starts in Ontario changed in April 2024 compared to April 2023?

Year over year, the total number of housing starts in Ontario decreased by 37 per cent. The decline was driven by a 41 per cent drop in multi-unit housing starts, while single-detached starts decreased by 8 per cent.

What are the specific trends in Toronto and other major cities within the province?

In Toronto, housing starts fell by 38 per cent, with both multi-unit and single-detached starts contributing to the decline. Ottawa-Gatineau and Hamilton also saw substantial decreases.

Ottawa-Gatineau experienced a 68 per cent drop in total housing starts, with a 76 per cent decline in multi-unit starts. Hamilton saw a 91 per cent decrease in total housing starts, driven by reductions in both single-detached and multi-unit starts.

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Why have construction levels slowed so much?

Despite the Ontario government’s plan to get at least 1.5 million homes built by 2031, progress has been slowed by high interest rates, impacting both builders and buyers, while the costs of materials and labour have also contributed to the slowdown in construction.

An uncertain economic outlook is also leading to caution from developers, who appear to be scaling back on new projects. Housing market dynamics are also in flux with a significant drop in new home sales, especially in condos.

In Toronto, sales of new condos fell in the first quarter of 2024 due to rising inventory of unsold units and soaring construction costs.

A report from condominium research firm Urbanation last month noted that sales of new condo units in The Greater Toronto and Hamilton Area (GTHA) reached levels similar to the late 1990s in the first three months of the year, with just 1,461 new condo units sold. That marks a decline of 85 per cent from the sales peak recorded in the first quarter of 2022 and a 71 per cent drop from the 10-year first-quarter average.

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The report also found the total number of condos now under construction is at its lowest level in more than two years.

“After two years of pre-construction sales trending down sharply, construction activity is being hit hard,” Urbanation president Shaun Hildebrand said in the report. “While anticipated reductions in interest rates in the second half of the year should lead to some improvement in market conditions for new condominiums, activity will likely remain subdued as the industry works it way through current inventory and digests the numerous government policies on housing recently released.”

How are government policies impacting housing starts in Ontario?

Ontario’s home building goals have been slowed by increased development charges, which have raised the cost of new construction projects, particularly in Toronto and Ottawa.

Incentives for building affordable housing, such as subsidies and tax breaks, are also failing to keep up with the higher costs of construction and borrowing, while zoning reforms aimed at allowing higher-density developments have been slow to materialize.

The federal Housing Accelerator Fund, which has allocated $4 billion to cities to encourage the removal of restrictive zoning rules and increase housing starts, has not yet yielded the expected results.

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