While we are glad that the Ontario government has finally taken some action on our housing crisis in the GTA, something we have been urging for many months, it is unfortunate that they are not doing enough to address the underlying causes of our housing supply problems.
The measures announced by the government are largely aimed at addressing the symptoms of our housing problems. They do little to address the underlying issue, which is that not enough new housing and not the right mix of housing is being built to keep up with consumer demand or the housing needs of this region.
The supply of new housing is critical to the overall health of the housing market. The only way you create more homes is to build them and since this is a fast growing region we need to build a lot of them.
On the new housing side of things we track the status of supply by measuring how much inventory there is available at the end of the month. Every month builders bring product to the market for buyers to purchase and they sell some of it. By looking at what is still available at the end of the month for home buyers to purchase we get a very clear indication of how healthy supply is and whether or not we are meeting the needs of the market and supplying buyers with what they want and need.
BILD has been tracking this information consistently for more than 15 years and what we have seen in recent years is a scary drop in inventory with each month bringing a new record low for available supply. Over the past year we have seen supply drop in half. The number of new homes available to buyers in builder inventories dropped from 21,006 at the end of March 2016 to 10,153 homes last month, to according to Altus Group, BILD’s official source for new-home market intelligence.
The ongoing decline in new housing inventory is a direct reflection of how difficult it is for the industry to bring product to the market. The hurdles builders face keep getting higher. There were few tangible measures in the government’s plan to deal with the many systematic barriers currently limiting supply such as the excessive red tape around approvals and getting permits, out-of-date zoning bylaws, and the lack of infrastructure needed to make land developable.
Moreover, the government’s plan does little to deal with or even acknowledge that a critical root cause of our current housing challenges is the disconnect between market demand for low-rise single family homes and the Province’s policies requiring higher density development.
The industry is following the Province’s intensification policy and we are building and selling far fewer low-rise homes , which includes detached, semi-detached and townhomes, than we were a decade ago, but demand for those homes has not dropped.
The available supply of single-family low-rise homes has taken a nosedive since intensification policy was introduced in 2006. There were only 932 new low-rise homes available to buyers in builder inventories at the end of March, whereas a decade ago there were 17,854 available. The scarcity is especially pronounced in the number of single-detached homes. In March 2007 there were 11,802 new detached homes available to buyers in the GTA. Last month there were 233.
The story the inventory numbers are telling is very clear. Not enough new housing and not the right mix of housing is being built to keep up with consumer demand or our housing needs.