In October 2024, Canadian housing starts increased by 8%, reaching a seasonally adjusted annual rate of 240,761 units. This represents an improvement over September’s figures of 223,391 units. The rise is a sign of some progress in the housing market, which has been facing increasing demand for new supply. However, despite this positive momentum, affordability challenges persist.
The Canada Mortgage and Housing Corporation (CMHC) has repeatedly highlighted that housing supply must grow at a much faster pace to restore balance in the market. The current rate of housing starts remains far below what is required to meet demand effectively.
The Role of Multi-Unit Developments
The majority of the October increase came from multi-unit developments such as apartments and condominiums. These projects rose by 7% month-over-month, contributing approximately 176,000 units to the total starts. Single-detached homes also saw a slight uptick of 1%, bringing their total to 47,400 units.
When looking regionally, urban areas drove much of this growth:
- Ontario: An additional 3,300 units were added in October, reflecting rising demand in cities like Toronto.
- Quebec: Housing starts rose by 1,600 units, indicating steady progress in urban centres.
- The Prairies: Alberta led the charge with a significant 9,300-unit increase.
While this growth is encouraging, it is far from sufficient to address the housing needs of urban populations, particularly in high-demand markets such as Toronto.
Toronto’s Persistent Affordability Challenges
The Toronto housing market continues to grapple with affordability issues. Recent figures for November 2024 show the average home price in the Greater Toronto Area (GTA) rebounded to $1,121,500. This marks an increase from September’s average price of $1,107,291, reflecting a renewed upward trend in home values.
This rise in prices presents ongoing challenges for buyers. Although the city has seen some new developments, the current pace of construction cannot keep up with demand. The lack of sufficient supply pushes prices higher, further straining affordability for first-time buyers and those looking to upgrade.
Barriers to Increasing Canadian Housing Starts
Several factors continue to hold back the pace of housing construction in Toronto and across Canada:
- High Interest Rates: Rising borrowing costs make it more expensive for developers to finance new projects.
- Land Availability: Urban centres like Toronto face a shortage of developable land, which restricts growth opportunities.
- Labour Shortages: A lack of skilled workers in the construction industry delays timelines for new builds.
These challenges must be addressed to enable a sustainable increase in housing starts and improve affordability in the market.
Government Measures to Address Housing Affordability
The federal government has introduced initiatives aimed at stimulating housing development. For example, the Affordable Housing and Groceries Act eliminates the Goods and Services Tax (GST) on new rental developments until 2030. This measure is intended to reduce costs for developers and encourage the construction of more rental units.
Additionally, the release of federal land for housing development is another important step. As of October, the Canada Public Land Bank includes over 385 hectares of land designated for housing projects. These efforts, while promising, need to be scaled up significantly to meet current demand levels.
Solutions to Increase Canadian Housing Starts
Restoring affordability in Toronto and across Canada requires a multi-pronged approach. Key recommendations include:
- Incentivizing Builders: Offering grants and tax incentives to developers can encourage more projects.
- Streamlining Approvals: Simplifying zoning and permitting processes would accelerate construction timelines.
- Expanding Rental Supply: Increasing purpose-built rental developments can alleviate demand for ownership properties.
- Improving Infrastructure: Enhancing transit networks and amenities can make suburban developments more appealing and viable.
By addressing these areas, the housing market can move closer to meeting demand and easing affordability pressures.
The Outlook for 2024 and Beyond
Although October’s numbers reflect progress, they are not enough to reverse years of under building. The CMHC has projected that housing starts in Canada will decline overall in 2024, marking the third consecutive year of lower construction activity. This decline is primarily due to financial constraints caused by high interest rates.
For Toronto, the path forward requires bold policy decisions and collaborative efforts between governments, developers, and communities. Without substantial action, affordability will remain a distant goal for many prospective buyers and renters.
Conclusion
The 8% rise in Canadian housing starts in October 2024 provides some hope for progress in addressing housing supply issues. However, much more needs to be done to achieve meaningful improvements in affordability. A concerted effort to overcome barriers, scale up construction, and implement supportive policies will be essential in the coming years.
