Yahoo Finance Rising cost of construction to add $7 billion to bill for national housing strategy: PBO
Rising construction costs will likely push up the tab for the federal government’s affordable housing initiatives, according to a report from the Office of the Parliamentary Budget Officer (PBO).
As it stands, Ottawa has carved out a budget of about $82 billion to cover the cost of its national housing strategy. But in a report released on Feb. 16, the PBO said more than $89 billion will be needed to accomplish its goal of bringing affordable housing units to Canadian residents.
“While federal spending to provide affordable housing and address homelessness has increased, so too has the cost of residential construction, reducing the real purchasing power of federal spending,” the report by PBO economists Carleigh Busby and Lisa Barkova said.
The national housing strategy, which was launched in 2017, was originally a 10-year plan that was expected to run through 2028 with a budget of $40 billion. Since then, the budget has doubled as the need for affordable housing has accelerated, though construction has not kept up.
New residential developments have become more expensive to build as a result of the rise in the cost of materials, land and loans.
Moreover, a shortage of construction workers has also driven up construction costs and timelines.
“Unlike some other industries, the building industry has a fixed capacity to construct more housing and it is losing many of its older and more experienced workers who are retiring,” said Ted Kesik, professor of building science at the University of Toronto, in an email. “There are not enough new people entering the workforce to offset those leaving and so the workforce is a significant factor.”
The Royal Bank of Canada echoed concerns about labour in its 2021 report, Powering Up: Preparing Canada’s skilled trades for a post-pandemic economy, stating that approximately 700,000 skilled tradespeople are expected to retire by 2028.
“Meanwhile, an outdated perception of the trades has hobbled recruitment efforts,” the report said.
According to BuildForce, a national industry-led organization that provides resources to assist the construction sector, remedying the skilled trade shortage alone may take another three years.
“BuildForce Canada projects that these market challenges could persist through the forecast period due to strong residential construction markets and a growing inventory of current and proposed major projects that are not expected to wane until 2026,” a report published on its website last year said.
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In June, the Canada Mortgage and Housing Corporation (CMHC) said the country would need 3.5 million more housing units by 2030 to improve affordability, but follow-up research unveiled in October found that there will only be enough labour to increase the number of starts in four major provinces — Ontario, Québec, British Columbia and Alberta — by 30 to 50 per cent.
Those more modest increases mean the country will likely struggle to reach its goals on affordable housing, even as apartment vacancy rates are at their tightest level in more than 20 years (1.9 per cent in 2022).
• Email: shcampbell@postmedia.com
