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🏗️ Apartment Construction Sustains Housing Starts in Canada's Largest Cities

Tuesday, 02 April 2024 06:43.PM

A surge in apartment construction, particularly in Toronto, Vancouver, and Calgary, more than offset declines in single-detached and semi-detached construction, causing the overall level of new home construction in Canada's six largest cities for 2023 to remain virtually unchanged from 2022. This according to the latest Housing Supply Report (HSR), released today by Canada Mortgage and Housing Corporation (CMHC), which examines new housing construction trends in Canada's six largest census metropolitan areas (CMAs).

Apartment construction, which includes both purpose-built rental and condominium apartments, reached record levels in Toronto, Vancouver, Calgary and Ottawa. Montréal, however, hit an 8-year low.

Purpose-built rental units accounted for a greater proportion of apartment starts in 2023, compared to historical averages, reflecting an unprecedented level of rental demand. Record condominium apartment starts reflected robust pre-sale activity and favourable borrowing rates secured before 2023.

The HSR also examines supply-side challenges, including high construction and financing costs, the complexity of developing larger projects and labour shortages. Construction timelines for all dwelling types were above historical averages in 2023, reflecting some of these challenges.

"There were a large number of housing starts in 2023, particularly in the rental segment, which is good progress, but not enough to improve affordability. The concern now shifts to whether construction of apartments will hold at these high levels in 2024. Clearly the demand for housing exists, particularly in rental, but financing costs could become too heavy for homebuilders to begin construction on large multi-family projects at the same pace seen in 2023."
- Aled ab Iorwerth, Deputy Chief Economist for the CMHC

Quick facts:

• The Apartment Construction Loan Program (ACLP) is the largest program in the federal government's National Housing Strategy (NHS) and provides low-cost loans to eligible purpose-built rental developers. The 2023 Fall Economic Statement announced an additional $15 billion in new loan funding, starting in 2025–2026, bringing the program's total to over $40 billion in loan funding, supporting the construction of 101,000 new rental homes by 2031-32.
• In January 2024, the federal government announced the Apartment Construction Loan Program (ACLP) would make low-cost loans available to homebuilders for the construction of more housing for university students on- and off-campus. This reform to the ACLP will help more students find housing they can afford close to where they study.
• MLI Select is a multi-unit mortgage loan insurance product from CMHC which was introduced in March 2022. It uses a points system to offer insurance incentives based on affordability, energy efficiency, and accessibility to homebuilders for new rental construction.
• In September 2023, the federal government committed to removing the Goods and Services Tax (GST)on all new qualifying rental housing construction.

SOURCE: Canada Mortgage and Housing Corporation (CMHC)

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