My last column here was about what I deemed the most interesting stat in our politics: backlogs in our state-of-good-repair obligations for municipally owned infrastructure.
Today, I want to tell you about what I think is the most alarming stat in our politics: housing starts, which are going down.
We know that thanks to the latest figures from the Canada Mortgage and Housing Corporation. These are national figures, and they’re bleak. But for our purposes today, I’m going to focus on the Ontario numbers, which are really bleak. (Indeed, it should be noted that, simply due to Ontario’s share of the national population, our bad numbers are directly and substantially contributing to the bad national numbers.) Housing starts in Ontario last month for single-detached homes were down 8 per cent compared to a year before, and the unhelpfully broad “all others” category for housing types was down a whopping 41 per cent from last April. The CBC reports that this brings Ontario’s housing-construction activity level down to where it was in 2018. That’s like a whole other era — although, for what it’s worth, the memories, though hazy, feel pleasant.
These are horrifying numbers, for reasons we’ll get into in a moment. But it’s important to say upfront that it’s not a mysterious number. There are a lot of things we have done that have slowed down the pace of housing construction in this country and in this province. Our policies are not aligned in a way that is producing the maximum number of homes.
But the elephant in the room is very much our currently high interest rates. Interest rates directly set the cost of financing, and this hammers new housing stats in two ways. First, it becomes harder to get the financing needed to build the units in the first place: developers borrow the money to build the homes upfront and pay back the loans when they sell the completed properties a few years later. That’s harder to do now.
And on the other side of the process, since interest rates also determine mortgage rates and higher mortgage rates price more people out of the market, it will be harder for developers to sell the units that it cost them more to make. It’s not hard to see why work on new developments and units has slowed down. The economic prospects for a new home, particularly in Ontario and specifically in the Greater Toronto Area, are now doubly stressed.
This is not to deny that there are other problems. There are. We’ll talk about those shortly. But interest rates, with a shortage of skilled labour in close second, are hands down the biggest challenges we face when trying to get housing built. They explain much, probably most, of the problem.
It’s important to lay out the above because, as one friend of mine — a man with many years of experience in politics — commented to me this morning, the cost of borrowing and the availability of skilled labour are two of that fairly rare subset of problems: ones where government spending can’t fix them. You can’t throw government money at this until financing costs go down, and if you try, you may well keep those costs higher. You also can’t throw money at the population until skilled labour appears.
You obviously can design specific policy initiatives that try to address these problems. You can establish federally or provincially backed low-interest loans for housing development, or you can create educational and labour-market policies that try to nudge people into the skilled trades or keep them there longer. But those are more complicated and take longer, and we’re already falling behind.
There is, to be sure, more that governments, including the Ontario government, could be doing. Zoning remains a major challenge that the provincial government has very consciously chosen not to fully tackle. NIMBYism, especially at the municipal level, remains a major concern. So we cannot blame all of this on forces beyond our control. We could be doing better. That’s a choice we could make.
But when you step back a bit and zoom out on the whole problem, the issue before us becomes starkly clear. The urgent need to get more houses built has gone beyond political consensus into something even more firm, akin to a universally recognized truism. I cannot really recall an issue that had such unanimous consensus across the political spectrum outside genuine sudden emergencies, like the rush to improve aviation security after the September 11 attacks or the immediate weeks and months of the COVID-19 pandemic. You basically cannot find anyone in a genuine position of political authority who is not reading out of essentially the same hymn book on this issue. To the extent that they disagree about anything, it’s simply that they each assert that they’d be the best, most faithful executor of what’s agreed must be done.
And yet! Despite this massive, rare degree of political consensus, and despite the fact that housing is the highest-profile public-policy issue in this country, we find ourselves in a situation where governments cannot directly and rapidly address the critical issues holding back housing construction and also don’t seem fully committed to or engaged with doing even what they can about the other issues.
We call it a housing crisis. I agree it is one! But what are we to make of a situation in which something is a crisis and the politicians agree it’s a crisis, but they won’t do all that can be done to address it?
There are only a few conclusions we can draw from this, and all of them are, as noted above, horrifying. This won’t be the last crisis we face. It probably won’t be the most dangerous or threatening. And we’ll have (more or less) the same people in charge for those, too. Great.
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