BILD report warns of significant negative effects to GTA housing
Construction interruptions stemming from the COVID-19 pandemic are likely to have significant negative effects on the Toronto housing market, a new survey conducted by the Building Industry and Land Development Association (BILD) shows.
The survey was conducted in mid-May, after the ban on all non-essential construction projects was lifted by the Ontario government. Although the province’s residential construction sector was deemed essential under provincial emergency orders, work was allowed to progress only on homes that were near completion.
The survey spanned 498 active construction projects representing 156,000 units at various stages of construction. Nearly half of those projects—276—were located in Toronto alone. In it, BILD aimed to discover the extent of project delays caused by the COVID pandemic. It further retained Altus Group to assess the potential economic implications of the findings.
The top-level findings of the report: the GTA will lose a significant number of housing starts, completion of many units will be delayed through 2021, the multi-family residential construction sector will lose thousands of jobs, and governments will lose hundreds of millions of dollars in revenues as a result.
“One might ask, if the building industry was granted essential workplace status, why are there new housing slowdowns,” said BILD president and CEO Dave Wilkes. “The response is a bit complicated. Disruptions to the supply chain negatively impacted the ability of the industry to secure vital building materials. Worksites had to adjust to COVID-19 protocols as social distancing rules negatively impacted productivity and some municipalities had to adjust to working remotely. This slowed processing of planning and building applications and stalled developments and construction projects.”
The survey found that 65 percent of projects in the City of Toronto reported interruptions of three to six months and 32 percent were greater than six months. Eighty-three percent of projects not yet above grade were delayed by three to six months, and a further 11 percent were delayed by more than six months. Eighty-five percent of projects under construction permitted for above grade reported a delay of three to six months and five percent greater than six months.
The Altus Group’s analysis of the data drew a number of conclusions. The first is that these delays will result in the loss of about 9,080 housing starts over the course of the next 18 months. This will delay occupancy of 8,030 units by the end of 2021, reduce construction activity, and cause as many as 10,000 jobs to be lost per year.
Moreover, says Altus Group, government revenues will suffer significantly from the losses in housing starts. Its analysis suggests revenue losses of $340 million in development charges, $13.5 million in education development charges, $26 million in property taxes, $364 million in HST, $53.8 million in provincial land transfer taxes, and $52.5 million in lost municipal land transfer taxes—for a total of some $850 million.
The final impact cited in the report suggests that about 2,250 fewer multi-family units will be under construction in Toronto (47,750 as compared to 50,000 in 2019). As a result, BILD estimates that the total economic activity created by the sector in Toronto will drop by $1.3 billion—from $5.4 billion in 2019 to $4.1 billion in 2020.
That loss could have a number of downstream impacts, including the losses of $2.6 billion in economic activity, of $1.3 billion in local GDP, of $1.2 billion in wages and earnings, and of as many as 9,900 jobs.
“Now more than ever, all levels of government must work together to make sure that proper measures are in place to remove barriers that will unlock consumer and industry construction investments to help kick-start the economy,” said Wilkes.