Ontario is experiencing a housing supply crisis, and the 2022 Ontario Budget forecasts more challenges ahead.
Earlier this year, Doug Ford’s government introduced the More housing for all (Bill 109) based, in part, on recommendations made by its housing affordability task force. Despite this, the 2022 budget forecasts annual housing starts to remain below 90,000 units per year for the foreseeable future, which is below current levels and just over half of the group’s own target. provincial government work.
Over the past decade, Ontario has recorded about 750,000 housing starts, with completions lagging somewhat at 670,000 units. Both the Ford and Trudeau governments have recognized that this is not enough to keep up with Ontario’s rapid population growth. The provincial task force called for an “ambitious but achievable goal of 1.5 million new homes built over the next ten years,” which the budget refers to, while the federal government’s 2022 budget sets a goal of ” double our current rate of new construction over the next ten years. the next decade. For Ontario, that would mean 1.5 million housing starts, matching the provincial task force’s goal of 1.5 million housing completions.
An average of 150,000 starts (or completions) each year over the next decade is no small feat. Last year, Ontario recorded 100,000 housing starts, the highest level since 1987 and the fourth highest in the province’s history. Despite the Bill 109 reforms and the need to significantly increase housing starts, the Ontario budget projects housing starts to decline and remain below 90,000 per year until 2025, when its projection finished.
It would be impossible to immediately start building 150,000 new homes a year overnight. A more realistic path to 1.5 million housing starts in a decade would be to increase housing completions by 6% per year, every year, through 2031. If Ontario were to achieve this level of growth, housing starts under construction would exceed 126,000 units by 2025, rather than the less than 88,000 currently projected by the Ontario government. The gap between the government’s housing ambitions and the planned results is glaring.
There is no reason to believe that these housing starts projections are inaccurate and the budget implicitly acknowledges that the current set of government policies is insufficient. Buried in the middle of the document, on page 94, there is a commitment to “provide an action plan for housing supply each year for the next four years, with policies and tools that support multigenerational housing and the missing intermediate dwellings”. Given the time it will take to develop this plan, design policy, implement these policies and get construction underway, this is unlikely to change the number of housing starts before the middle of the decade.
This lack of new supply will continue to fuel Ontario’s housing affordability crisis. The same budget also predicts that while the massive home price appreciation experienced during the pandemic will end, resale home prices will rise faster than inflation through the middle of the decade. It also shows that interest rates will also rise over the next few years. This puts a double crunch on first-time home buyers, as not only will the size of down payments required increase, but so will monthly mortgage payments from higher interest rates.
Fewer housing starts, higher house prices, higher interest rates. If the 2022 Budget projections are correct, Ontario’s housing problems will get worse before they get better.
Mike Moffatt is Senior Director of Policy and Innovation at the Smart Prosperity Institute and Adjunct Professor at the Ivey Business School.
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