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housing construction slowdown hitting vancouver, new reports say
dan fumano: even if interest rates drop more, housing starts not expected to come close to demand for homes
aug 19 2024
3 minute read
low-rise condos under construction in metro vancouver.
gerry kahrmann
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the number of new homes starting construction in the vancouver area has dropped, new figures show, affirming what many industry watchers had feared .
at a time when governments appear aligned in a desire to dramatically boost housing supply, a combination of factors — including high interest rates, rising construction costs and permitting delays — have made it more challenging for the private sector to build.
even if there is a rebound in developer activity in the coming years, as some predict, some observers worry it won’t be enough to meaningfully address the housing shortage facing vancouver and other canadian cities.
the metro vancouver area had a 15 per cent drop in the number of new housing starts in july of 2024 compared with the same month a year earlier, according to canada mortgage and housing corporation figures released last week. the decline came as housing starts grew by eight per cent across other canadian centres with more than 10,000 residents.
another new report, released last week by the conference board of canada, predicts a further decline this year and next: while housing starts in greater vancouver reached a record 33,200 units last year, that rate has slowed, the board reported, predicting 28,800 units in 2024 and around 26,000 a year “over the next few years.”
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this slowdown is “both concerning and expected,” said mike moffatt, an ontario-based economist and senior director of the smart prosperity institute, a national think-tank.
“it kind of confirms what we were afraid was going to happen,” moffatt said. “the challenge is that our population is still growing a lot, so the demographic-based demand hasn’t gone away, despite the fact that we can’t get much built under these conditions. so, it is a perfect storm right now. and the rates going down a bit helps, but, you know, it doesn’t look like it’s getting much better any time soon.”
last week’s cmhc release says that while vancouver housing starts are down this year, “it’s important to note that 2023 was a record year for new home construction in the region.”
moffatt says while it’s true that 2023 was a big year for residential construction in vancouver and some other canadian cities, it was still not close to the pace that the cmhc has said is needed to tackled the country’s housing shortage.
in 2022 , the cmhc estimated that canada would need 5.8 million homes by 2030 to restore affordability to the housing market, which represented an additional 3.5 million units on top of the projected 2.3 million expected if the pace of building continued as usual.
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experts, including moffatt, predict housing starts could rebound in the next couple of years, especially if interest rates fall again.
but even then, “we’re basically treading water,” moffatt said. “if we’re lucky, 2026 looks like 2023 which isn’t bad, but it’s not really good either, when we’re trying to double housing starts.”
bob ransford, vice-president of development for the vancouver builder century group, said he is “not anywhere close to panic mode” and he expects that once interest rates stabilize, the pace of development will pick up again.
“i’ve been around a long time, i’ve been through downturns before, and i’ve seen much deeper downturns which we came out of,” said ransford. “this is a pause driven primarily by interest rate movement.”
tony letvinchuk, managing director of macdonald commercial real estate services in vancouver, said he cannot recall a time in his four decades in the real estate industry “where all three levels of government were so in sync with the stated objective of more housing.”
but even if market conditions change and government policies have the desired effect, and developer interest surges, that would still leave another challenge: labour.
the b.c. construction association has long raised alarms about labour shortages, and earlier this year estimated that by 2033, b.c. will have 6,600 unfilled construction jobs.
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“we’re essentially going to go from one series of problems to the next, which is the need to find qualified workers,” letvinchuk said. “the development puzzle has lots of pieces.”
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