Making the Impossible Possible: Is Ontario’s Goal of Building 1.5 Million Homes by 2031 Realistic?
It’s no secret that Canadians have a housing shortage that needs to be addressed with the cooperation of various governmental tiers. All Ontarians—rural, urban, suburban, northern, southern, young, and old—are impacted by the housing supply shortage. “, declared Steve Clark, minister for housing and municipal affairs.
Premier Doug Ford and the Ontario government announced in October 2022 their intention to build 11.5 million homes over the following ten years in an effort to generate a sufficient supply to meet the high demand both now and in the future. This ambitious goal translates to an average of 150,000 new homes per year, setting a target to double new housing construction from the decade prior to 2022, which saw 750,313 homes started (and 669,378 homes completed).
Bill 23, also known as the More Homes Built Faster Act, is a provincial goal that has drawn opposition from numerous groups, including opposing political parties, economists, public servants, and environmentalists. Based on where and how quickly new homes will be built, it has been perceived as harmful to the Greenbelt and municipalities; it has also been deemed unrealistic and excessively aggressive.
Let’s look more closely at why some people dismiss the idea that Ontario will achieve this aspirational goal and why the administration is still upbeat.
Crunching the Numbers
Less than 90,000 homes will be built annually for the following three years, according to the recently released provincial budget for 2023. In fact, the figures have been falling: 2022 saw the start of 96,100 new home constructions; this number is expected to drop to 80,300 in 2023 and then again to 79,300 in 2024. Although 82,700 new homes are expected to be built in 2025, this is still well below the target average of 150,000 homes per year.
The issue of a labor shortage is another barrier to this plan’s success. Ontario needs 72,000 more workers to meet the demand for labor, and finding and enticing those particular workers to move there heavily depends on federal immigration policies. Currently, only 2,000 new workers are included in the budget, far short of the province’s housing target. And with a backlog of 2 million immigration applications that has grown over the course of the pandemic, this appears to be a particularly challenging and time-based issue to solve.
These immediate, short-term projections appear to show that Ontario’s goals are impractical, but the government has stated that it will continue to work toward achieving them through future adjustments to the budget and policies. Although Peter Bethlenfalvy, the minister of finance, remains upbeat about the province’s housing target, he acknowledges that “We’ll have some lower years, and we’ll have some higher years,” and that “We’ll have some higher years,” but it is obvious that more planning is necessary to get the province ready for future demands.
Local Effects and Criticisms
Controversially, Bill 23 contains provisions that would compel the conversion of 7,400 acres of Greenbelt protection to new housing, having a detrimental effect on ecosystems and creating future issues for cities attempting to control sprawl. Green spaces, wildlife, and the climate will all suffer greatly if the Greenbelt is reduced in size.
One suggested remedy would be to expand the protected lands in key locations to make up for losses elsewhere. Changing from the sprawling to the intensifying strategy, or building upwards rather than outwards, is another option. As of now, the province has modified some of Bill 23 to permit some appeals for green projects, restoring some of the municipal powers and sustainability standards that had been reduced by the Act’s original version.
However, those funds, which could total hundreds of millions of dollars, are required for cities to build and maintain infrastructure. Another provision of Bill 23 reduced developer fees in order to promote and expedite new construction. Towns will experience significant strain in the upcoming years to keep up with population growth if they lack the infrastructure to support large-scale new housing developments outside of current municipal boundaries. It is obvious that in order to address these issues, the province and the cities must work together and support one another.
For Investors, What Does This Mean?
Everyone is aware that the province lacks affordable housing, regardless of Bill 23 and its apparent impracticality or controversy. However, Ontario continues to be a popular choice for people and families looking to settle in the country, particularly in urban areas like the City of Toronto, York Region, and Peel Region, so there will always be a demand.
Immigration will continue to contribute to the rising demand for homes regardless of what happens with the supply because it is unlikely to slow down. In fact, 227,235 immigrants entered Ontario between 2021 and 2022, a significant increase of more than twice as many as those who arrived in the province at the height of the pandemic (107,929 immigrants between 2020 and 2021). Naturally, as soon as those newcomers arrive, they will need a place to call home.
Now is the best time to invest in the current market because the interest rate is still low when viewed historically, where supply is limited and demand is high. The standard 5-year mortgage rate has been 6 point 46 percent for the past 30 years. The controlled rise in interest rates in 2023 — currently hovering at 4.5 percent — doesn’t seem as dire as the news cycle would have people believe when compared to the all-time high of 18.38 percent in 1981 and the all-time low of 4.79 percent of 2021 for average 5-year conventional mortgage rates.
In the future, buyers will rush to buy in a seller’s market as a result of the gradual increase in interest rates holding steady and eventually falling. But for now, while most people are still hesitant to apply for mortgages due to rising interest rates, astute investors know that this is the best time to buy.
In order to attract buyers during this time, developers drastically reduce the price of housing. In some cases, this results in a buyer of a lower-priced condo with a higher-rate mortgage saving more money than one of a higher-priced condo with a lower-rate mortgage. As the saying goes, “Buy low, sell high”!