The housing crisis: A continuing massive shortage of 3+bedroom homes in Eastern Ontario caused by fees, regulations, and demographic challenges

Ontario Construction News staff writer

The housing shortage challenge in Eastern Ontario – and throughout Canada – has a diversity of causes and will not be solved easily, speakers at the Eastern Ontario Housing Summit 2024 in Ottawa say.

Supply and demand are imbalanced; fuelled by massive immigration, development fees and building costs, and regulatory bottlenecks – and even if all of these issues could be resolved, there will be bottlenecks with construction labour shortages and inefficiencies, summit speakers  and panelists said.

The Greater Ottawa Home Builders Association (GOHBA) co-ordinated the summit last Tuesday (May 28), inviting political leaders, consultants, builders and economic development officials from Ottawa and other eastern Ontario communities, large and small.

Jean-Fraçois Perrault, senior vice-president and chief economist at ScotiaBank, indicated it is wishful thinking to hope that interest rate reductions will ease the housing crisis.

He said, while the rates are expected to decline from current levels in next few years, they won’t get to the near-zero levels seen over the past decade. Even if the rates decline, this won’t really solve the affordability issue, because prices will likely increase in tandem.

“As you well know, there is a massive imbalance between supply and demand,” Perrault said. “You can debate about the extent, but it’s in the millions of units.”

Housing costs, accordingly, are impacting decisions on where people live and work. People in areas with extremely high costs are migrating to less expensive communities, driving up prices there.

Mike Moffat, senior director of the Smart Prosperity Institute, outlined some of the key demographic elements shaping the housing crisis.

He said the data indicates Ontario needs 1.7 million new homes in the next decade to “accommodate population growth and pre-existing shortages.” But the problem is magnified in that the biggest shortage is for three-plus bedroom homes for families with children, he said.

“We need to double or triple” the number of homes currently being built to meet the projected needs – but “we’re building half as many” as we need, Moffat said.

The challenges can be broken down regionally, including the City of Ottawa, the communities in Eastern Ontario  near Ottawa, and other communities such as Kingston and Peterborough. Each area has its own story about migration, pricing, and housing availability.

Population growth within Ottawa’s municipal boundaries has been accelerating since about 2015, with annual growth increasing from about 10,000 a year to about 30,000 last year. This represented about a 4.5% annual growth.

He said consultants working with municipalities have developed projections with expectations of annual growth of 1.2% to a high to 1.7% per cent. “They’re growing times faster than the fastest scenario,” he said.

“We’re basically planning for failure here,” when the most outrageous planning scenario reflects perhaps one-third of what is actually happening.

Looking beyond the city to the entire Eastern Ontario region, the growth data also far exceeds planning projections, increasing from about 15,000 a year in 2015 to more than 57,000 growth last year.

“None of this was planned for,” Moffat said. “Community populations are growing four to six times faster than what was projected in the Official Plans a decade ago.”

Moffat explained that the growth in Eastern Ontario communities varies by the area.

He said Ottawa’s population increase has occurred largely because of a massive influx of international students. Permanent resident immigrants are also driving the city’s population; with upwards of 90% of new immigrants in the province settling in the city.

Smaller municipalities and rural areas outside Ottawa are seeing growth by people moving from other areas of the province – largely because housing costs are more affordable.

Going forward, while international student demand will likely taper, the permanent immigration numbers don’t see any sign of slowing, he said. “The City of Ottawa is a very attractive place for new permanent residents,” he said. “That’s not going to change.”

The nature of population growth has a direct impact on housing requirements. For example, immigrant families will put greater strain on housing demand than already-established families adding children, or single students staying for a while in the country.

“We are adding a lot of people in the late 20s and early 30s,” he said. “We are adding a lot of people who are a first-time home buyer.”

Other people creating housing demand in more rural areas are older working-age and early retirees seeking a better quality of life. (However, after about 12 months of retirement, most people who haven’t moved elect to stay where they are, Moffat said.)

The challenge is that “future demand is going to be far higher than the official plans” in the various municipalities, he said. “I don’t think the plans are compliant with reality.”

At least in Ottawa, there has been progress in building apartment units – but there is a real shortfall in larger homes.  “We need row housing, we need fourplexes, we need semi-detached” homes.

The reason for this gap is “a combination of regulations, taxes and economic conditions,” Moffat said.

He said the impending slow-down in international students will help, especially for apartments and smaller units. However, the challenge for three-plus units will not be resolved without significant regulatory changes and lower development charges and fees.

With high development charges representing a significant portion of the overall building costs, there is a disincentive to build smaller or less-expensive structures.

 

 

 

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