Job losses mounting as single family housing starts tumble


Michael Lewis

Special to Ontario Construction Report

A tumble-in single-family housing starts is taking its toll across the construction labour force with job losses mounting in site clearing, foundation and framing trades, says the head of the Residential Construction Council of Ontario (RESCON).

“What started to happen last year was sales really started to fall off in both high rise and low rise,” said Richard Lyall, president of RESCON whose members construct the bulk of new housing in the province.

He said the employment impacts have been turning up initially in low-rise developments which take comparatively less time but will work their way through finishing trades in single and semi-detached residences and then to mid- and high-rise housing.

Lyall said workers in segments including excavation, concrete pouring and drainage are being laid off while once plentiful job postings disappear as single family housing projects are delayed or abandoned.

“There’s not much in the pipeline, not many new products are being started,” although he said some high-rise developments are going ahead thanks in part to removal of the GST/HST on rental developments.

He said some high-rise projects where building started before rate hikes kicked in are being completed at a loss.

Statistics Canada data shows a 2.2 per cent decline in Ontario construction employment from January to February for a loss of 5,500 jobs. Employment fell 4.1 per cent nationally in December compared to November for a loss of 66,700 jobs.

Construction employment was down 1.1 per cent from a year ago although the current picture may be worse given the “data lag” in industry reporting, Lyall said.

The unemployment rate rose to 5.9 per cent in December, a month over month increase of 1.4 per cent but in line with the historical average, according to a report from BuildForce Canada.

“We’re going into a dip right now,” Lyall said, suggesting that the building industry will rebound thanks to long-term demand for housing and the infrastructure that goes with it.

But Lyall said a host of challenges are rocking market fundaments and contributing to the decline in single family housing starts, including aggressive central bank moves to cool inflation that have seen 10 interest rate hikes in the past two years.

The industry has also faced supply bottlenecks, escalating raw material and labour costs as well as municipal taxes, fees and permit wait times that he called among the most onerous in the developed world.

According to Statistics Canada’s Construction Cost Index, the surge in costs together with a ballooning population has accelerated increases in the development fees and levies imposed by municipal governments which have jumped “by as much as 30 per cent annually in 2022 for single or semi-detached units.”

And a study by the Altus Group found that the tax burden on new housing in Ontario averages 31 per cent of the purchase price, with taxes for each new single-family home in the city in 2018 totalling $186,300, or 21.7 per cent of the cost.

Lyall said the factors weighing on single family housing starts and that are drying up employment may lead to a reluctance to provide apprenticeships since there might not be placement opportunities a year from now.

He said the potential lack of work for apprentices along with a “brain drain” of young talent will exacerbate skilled labour shortages in the building sector when the economy rebounds.

“We will come back — we will come out of this,” Lyall said. “But when we do, I’m worried that we’re not going to have a workforce.”

A report from the Canada Mortgage and Housing Corp., meanwhile, says combined 2023 housing starts in Toronto, Montreal, Vancouver, Calgary, Edmonton and Ottawa dipped by 0.5 per cent compared to 2022, totaling 137,915 units.

Apartment starts surged by 7 per cent, reaching a record high of 98,774 units, but the increase was offset by a decline in the construction of “ground-oriented” homes.

Single detached starts dropped by 20 per cent, the most significant decrease among all housing types due to weaker demand amid five-year fixed mortgage rates of more than 5 per cent.

Buoyed by unseasonably mild weather, the rate of seasonally adjusted new home construction bounced back in February, climbing 14 per cent compared to the previous month to 253,468 units and higher than the 230,000 units economists were expecting.

February’s housing starts were up 11 per cent year over year with the increase driven entirely by higher apartments and condominiums starts that increased 16 per cent, while single-detached starts were down 14 per cent.

“As the national housing shortage continues, the focus for developers continues to shift towards multi-unit construction in Canada’s major centres,” said CMHC chief economist Bob Dugan.

TD economist Rishi Sondhi noted that starts in the first two months of the first quarter are below their fourth-quarter level and “will continue to decline as past weakness in home sales translates to fewer homes built.

“We’re expecting housing starts to fall in 2024,” Sondhi said in a note to investors, citing a drop in sales in the pre-construction market over the past two years after mortgage rates began to climb.

Starts will fall he said even if home sales receive a boost from Bank of Canada rate cuts, which Lyall said could spur house price hikes where there is a dearth of single-family supply.


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