Ontario’s pace of homebuilding lags far behind population growth
The high cost of housing and rent is a major concern for many Ontarians. According to a recent Leger poll, 59 per cent of Ontarians worry about paying their mortgage or rent, and 96 per cent of Ontarians believe the increasing cost of rent is a serious problem.
What’s causing Ontario’s housing affordability crisis?
There’s a widening disparity between the number of people wanting to rent or buy homes and the number of actual homes available. Housing prices and rents increase as the number of homebuyers and renters increases much faster than the number of homes available to purchase or rent. Clearly, builders in the province are not building enough homes.
A new study finds a particularly sharp increase in the number of homebuyers and renters in Ontario relative to the number of new homes completed occurred starting in 2014. Roughly a decade ago, the population in the province was growing by 1.6 people for every home built. As population growth has increased, in 2022 that number has skyrocketed to 5.5 new residents per home built—the highest number in the last 50 years.
At the same time, builders in Ontario are constructing fewer homes than they did in the 1970s. Housing completions averaged 87,368 per year in the province from 1972-1979. During that time, the number of homes built was roughly in line with the number of new people when the province’s population grew by an average of 98,353 people each year.
Circumstances are quite different today. Population growth in Ontario was especially notable in 2022 when the province’s population increased by 445,495—the highest annual increase by a wide margin. Yet builders were only able to build 71,838 new houses last year.
Simply put, housing demand has increased substantially but home building has not kept pace. This housing shortage has pushed prices and rents upwards for Ontarians. Consequently, the Canada Mortgage and Housing Corporation (CMHC) estimates that 1.85 million homes must be built in the province by 2030 to restore housing affordability for Ontarians.
Policymakers at all three levels of government have taken measures recently to address housing affordability, but they must go further and faster. Housing starts are trending down rather than up. The longer it takes to approve new housing and the more fees and taxes developers pay, the less housing we’ll get built and the longer it will take.
One thing that governments can do immediately is stop stoking demand. The federal government continues to roll out new programs aimed at making it easier to buy homes. But throwing money at the demand side of the housing market only serves to boost prices. It’s not only a waste of money, it’s counterproductive.
The Ford government must be laser-focused on closing the gap between housing supply and housing demand, and should avoid or rescind any new or existing policy that stokes demand. Governments, including municipalities across the province, should work to relax zoning laws, reduce developer fees, and speed up permit processes to help boost housing supply.
All levels of government must work together to address the growing gap between population growth and housing completions in the province. Otherwise, Ontarians’ current struggles with high housing and rent costs are likely to persist, if not worsen.
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