Apartment starts offset plunge in single-detached home starts in 2023

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The results suggest that building single-family homes is becoming a challenge for developers

Published on March 27, 20243 minutes reading time

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An apartment building under construction in Vancouver.An apartment building under construction in Vancouver. Photo by Jason Pane/PNG

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The number of single-family homes built in Canada's major metropolitan areas fell sharply in 2023, even though overall housing starts only fell slightly, it says Housing supply data was released Wednesday from Canada Mortgage and Housing Corp. published.

CMHC's report on New homebuilding trends in Canada's six largest census metropolitan areas (CMAs) – Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal – found housing construction fell 0.5 per cent compared to 2022, with a total of 137,915 units started.

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While housing construction rose seven percent to a record high of 98,774 units, the gains were offset by a decline in ground-floor apartments, with single-family housing starts falling 20 percent.

The results suggest that building single-family homes is becoming a challenge for developers.

“Ground floor apartments, especially single-family homes, have become increasingly unaffordable for homebuyers. The share of single-family homes in construction reached a record low and is expected to remain low in the near future,” the report said.

Despite an increase in housing construction, the overall level of new housing construction in Canada's six largest cities remains virtually unchanged in 2023 compared to 2022.

CMHC deputy chief economist Aled ab Iorwerth said overall housing construction in Canada's six largest cities was virtually flat in 2023, as many housing starts in 2023 were for projects that secured financing in 2022, as interest rates increased were lower. This timing explains why there was enough construction to maintain the level of housing starts in 2023 compared to 2022, but not enough to see an increase in numbers.

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“Higher interest rates … place a significant burden on developers’ ability to access financing, and so the level of interest rates ultimately matters very much,” ab Iorwerth said. “The impact of higher interest rates on access to credit will be more noticeable this year, so we are a little concerned about housing starts this year.”

Delivery barriers such as rising costs and labor shortages were also listed in the CMAs as hurdles to implementing projects.

While CMHC has highlighted risks from higher interest rates, the Ontario government expects new home construction to increase this year. However, it was acknowledged that the province is still not on track to meet its goal of building 1.5 million homes by 2031.

In the budget released Tuesday, Ontario forecast 88,000 will be built, up from 80,000 forecast in last year's budget.

This number is expected to gradually increase to 95,800 in 2027, based on projections based on an average of private sector forecasts.

Still, Ontario is still not on track to meet its goal of 1.5 million homes, which would require building at least 125,000 homes this year, rising to at least 175,000 per year.

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The budget's provision of $1.6 billion in new funding for housing-supporting infrastructure is expected to mitigate shortfalls in housing targets. According to the federal government, municipalities can use these funds to address critical needs such as water pipes and roads, removing long-standing barriers to the development of new housing.

On the day the budget was released, Finance Minister Peter Bethlenfalvy admitted construction starts had not met his expectations. He attributed the slowdown in the construction industry primarily to high interest rates. Nevertheless, he was confident.

“This too shall pass, and we will not waver in our commitment to finding more ways to build more homes,” he said.

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