If Budget 2023 is to be believed, Ontario’s housing shortage will get worse before it gets better, with housing starts falling and remaining low for the next three years, as forecasts have been slashed from the 2022 budget estimates.
Ontario needs a lot of homes to meet our rapidly growing population. In the last twelve months alone, the province added nearly 450,000 people — roughly equal to the four years of growth from 2012 to 2015. As a first step to housing that growing population, the province has set a target of building 1.5 million homes from 2022 to 2031, with 29 individual targets for municipalities, from 285,000 for the City of Toronto to 8,000 for the City of Kingston.
Given the demographic change and population growth occurring in Ontario, these targets are appropriate, as our study Ontario’s Need for 1.5 Million Homes shows, or too low, as both the provincial target and our study were released before the federal government’s increase in immigration targets last November.
Failing to build those homes will lead to increased homelessness, a lack of affordability, and a brain drain to other provinces. For example, in the past year, nearly 40,000 Ontarians have moved to Alberta, with less than 17,000 moving in the other direction. With the average single-family home being over $400,000 more expensive in Ontario than in Alberta, it is no surprise so many young families, particularly first-time homebuyers, are making the move. Alberta is even capitalizing on that difference, running an ad campaign called Alberta is Calling, advertising its lower home prices to encourage working-age Ontarians to move.
Building 1.5 million homes in 10 years was always going to be difficult. We have never once built anywhere near 150,000 homes in a single year; last year, the province only completed 72,000 housing units, from single-detached homes to studio apartment suites, though it did start the construction of 96,000. In the province’s history, we have never even completed 850,000 homes in any 10-year period.
In fact, we have never even hit 750,000 completions, or even half the target, in any 10 years since the period from the fourth quarter of 1972 to the fourth quarter of 1982, which roughly coincides with the decade-long run of the television show M*A*S*H.
Every Ontario budget contains economic forecasts on vital economic indicators, and this one was no different. Like Budget 2022, this year’s budget contains housing start forecasts for 2023, 2024, and 2025. In Budget 2022, the province forecasted we would average over 86,000 housing starts each of those three years. This year’s budget downgrades that annual average forecast to under 81,000. If these forecasts prove correct, less than 340,000 homes will have been started in Ontario in the first four years of our ten-year target. This would require the province to average over 190,000 housing starts over the final six years just to hit 1.5 million housing starts, nearly triple the 1990-2022 annual levels.
These forecast downgrades, primarily due to changing economic conditions, consider existing policy measures, such as the controversial Bill 23. They do not incorporate potential future actions and show that bold actions are required. These include implementing many unfulfilled recommendations of the province’s Housing Affordability Task Force, such as allowing “as of right” residential housing up to four units and four storeys on a single residential lot.
The budget notes some of the other bottlenecks preventing more housing from being built. It cites a BuildForce Canada study that an additional 72,000 construction workers will be needed in Ontario by 2027 and notes several investments the province has made in workforce development. The budget also recognizes that cost is one of the most considerable barriers to getting projects started and calls on the federal government to reform the HST to support new housing and rental development in the province.
Budget 2023 should be a wake-up call on how far the province is from building the housing supply to ensure everyone has an attainable home that meets their needs. While time is running out, the province has opportunities to address this. Earlier this month, the government announced the members of the Housing Supply Action Plan Implementation Team, headed by Mayor Drew Dilkens of Windsor. They may be the province’s last hope in making up for lost time, and developing a plan that would greatly exceed the homebuilding forecasts in Budget 2023.
Mike Moffatt is the senior director of policy and innovation at the Smart Prosperity Institute and is an assistant professor in the Business, Economics and Public Policy group at Ivey Business School.
Editor's note: This story has been corrected to state that Kingston, not Ottawa, is a municipality with a target for building 8,000 homes by 2031. Ottawa's target is 151,000 homes.
