Why housing starts are booming in Alberta and declining in Ontario

The housing landscape in Canada is experiencing notable disparities, particularly between Ontario and Alberta. While Ontario grapples with a decline in housing starts, Alberta is witnessing a remarkable surge. This discrepancy raises essential questions about the factors contributing to these divergent trends and the implications for homebuyers and the broader economy. Understanding the underlying reasons can provide insight into the future of housing in these provinces.

Housing starts in Ontario vs. Alberta: A tale of two provinces

Recent data reveals a troubling trend in Ontario, where housing starts have shown a significant decline compared to Alberta's robust growth. This divergence can be attributed to a variety of economic, regulatory, and demographic factors that influence construction activity in each province.

• Ontario's challenges: High development charges, increased taxation, and regulatory hurdles have deterred new housing projects.
• Alberta's opportunities: A favorable economic climate, lower costs associated with development, and a proactive government have led to increased housing construction.

Understanding the housing crisis in Ontario

Ontario's housing crisis is multifaceted, stemming from a combination of high costs and insufficient supply. The province has seen a dramatic rise in development fees, which can exceed $100,000 for new constructions. These costs inevitably affect the market by limiting the number of affordable homes available to buyers.

Moreover, homebuyers in Ontario face a 13% harmonized sales tax (HST) on new homes, though some can apply for rebates to alleviate their financial burden. However, this does not fully offset the rising costs of housing, further straining affordability.

Regulatory and economic factors affecting supply

The increasing reliance on development fees by municipalities due to a lack of stable provincial funding has compounded the issue. Cities are forced to depend on these fees, which in turn escalate the overall cost of housing. This situation has created a mismatch between supply and demand, leading to a stagnation in new housing projects.

Experts argue that Ontario's provincial government has made several economic missteps in its housing policies, contributing to the crisis. These mistakes have led to a system where building new homes is often more expensive and complicated than it should be.

Alberta's housing boom: Key drivers

Contrastingly, Alberta is enjoying a housing boom, attributed largely to interprovincial migration, particularly from Ontario. The province has become an attractive destination for many Ontarians seeking more affordable housing options.

Alberta's government launched a major talent recruitment campaign in 2022, aiming to attract skilled workers and families. Advertisements have been strategically placed in Ontario and other provinces, promoting Alberta as a land of opportunity.

• Younger demographics: Many newcomers are younger, higher-income families who typically consume more housing than the average migrant.
• Economic resilience: Alberta's economy has shown resilience, with job growth in various sectors driving demand for housing.

Population growth and housing demands

While both provinces have experienced similar population growth rates, the nature of their newcomers differs significantly. Ontario's influx often includes international students and migrants who may require less housing. In contrast, Alberta's growth is fueled by individuals seeking permanent residence and stability, which drives higher demand for housing.

Mike Moffatt, a housing expert, emphasizes that housing starts serve as a lagging indicator of market conditions. The decisions made today reflect the economic environment of two to three years prior, making current figures a reflection of past trends rather than present conditions.

Future outlook for Alberta's housing market

Despite the current boom, experts foresee that Alberta's housing market may cool down in the coming years. Recent data indicates that the province's population growth has already begun to taper off, which could signal a shift in housing demand.

However, Alberta's approach to homebuilding presents valuable lessons for Ontario. The province has managed to keep development charges and taxes at reasonable levels, facilitating a more accessible housing market.

Policy implications for housing in Canada

The federal government's role in housing policy is crucial. Recently, the Liberal government proposed measures to waive GST for first-time homebuyers, particularly on homes priced below $1 million. This initiative aims to alleviate some of the financial burdens faced by new buyers, but its implementation is still pending legislative approval.

• Government promises: There have been numerous promises to cut municipal development charges to stimulate housing construction.
• Criticism of the current administration: Conservative critics argue that the federal government has fallen short in delivering on its housing commitments.

Scott Aitchison, a Conservative housing critic, highlights that the slow pace of government action is a significant barrier to housing development. He notes that regions where it is most challenging to build are often those experiencing the most severe housing shortages.

Ultimately, addressing the housing crisis in both Ontario and Alberta will require concerted efforts from governments at various levels to ensure that policies promote affordability and accessibility for all Canadians. By learning from Alberta's successes and addressing the shortcomings in Ontario, there is potential for significant progress in the housing market across Canada.