By Matt Lundy* – October 2022
Long before the pandemic, residential developers were fretting about labour shortages in their industry. Skilled tradespeople were nearing retirement age, they warned, and relatively few young people were replacing them, opting instead for white-collar work in services.
The situation is only getting worse, said Sue Wastell, president of Wastell Homes, a builder in London, Ont. It can take five weeks to get an excavator on site – one of the first steps of construction. Then there are waits for concrete finishers, painting crews and so on. The entire process is jammed up, leading to delays in move-in times.
“There’s just not enough operators to fill that gap” in labour, Ms. Wastell said. “Everything is taking longer.”
The outlook looks similarly bleak. Canada Mortgage and Housing Corp. said on Thursday that, even under a best-case scenario of labour supply and efficiency, projected housing starts between now and 2030 will be nowhere near enough to make homes affordable in the largest provinces.
“There are not enough people who can build homes and address the housing supply gaps that exist mainly in Ontario, B.C. and Quebec,” the federal agency’s report said. “Labour capacity will be a big problem and it might make housing less affordable.”
It’s yet another reminder of a housing crisis without relief. Despite a broad pullback in prices of late, affordability is getting worse as borrowing rates rise at the fastest pace in decades, shutting hopeful buyers out of the market. Competition for rentals is getting more intense, reflected in bidding wars and surging costs.
To solve the problem, policy makers have zeroed in on boosting supply in dramatic fashion. In its spring budget, the federal Liberals dedicated more than $10-billion in new spending to various housing initiatives, with a goal of doubling construction over the next decade. Meantime, several mayoral candidates in this month’s municipal elections in Ontario have set long-term targets for new housing supply.
The task ahead is nothing short of massive. In June, CMHC estimated that Canada would need to build an additional 3.5 million homes – that is, beyond projected levels – by 2030 to restore affordability. The agency’s calculations were based on bringing shelter costs, as a proportion of disposable income, back to levels of 2003 and 2004, which it said was “the last time housing was affordable.”
But the goal of ramping up construction could be dead on arrival.
For one, Canada is already building a lot more homes than in past decades, largely because developers have shifted their focus to high-rises and smaller units. As of the second quarter, more than 340,000 housing units were under construction, the most since at least 1990, according to CMHC figures.
“Canadian builders are effectively going all out, bringing as much supply to market as they can against constrained labour supply, material costs and development hurdles,” Robert Kavcic, a senior economist at Bank of Montreal, wrote in a research note in July. “So, the federal government’s goal of doubling the rate of construction over the next decade seems incredibly difficult in the best of times.”
These are, however, not the best of times. The Bank of Canada is aggressively raising interest rates to tame steep inflation, which has led to an economic slowdown and fears of recession. While housing starts remain elevated, some developments are being cancelled or delayed as financing costs rise and buyer interest wanes.
As ever, labour is tough to find. In the second quarter, employers were recruiting for about 90,000 roles in construction, more than double what was sought before the pandemic, according to Statistics Canada.
Despite those opportunities, job growth is modest. Employment in construction has risen by fewer than 20,000 people (1.3 per cent) over the past three years, lagging the overall pace of job creation. On Friday, Statscan said self-employment in construction had fallen by 52,000 people (12 per cent) over that span.
The CMHC report made several recommendations to boost output. There should be more emphasis on converting existing structures to residential units, such as offices that companies abandoned in favour of remote work. Financial incentives should be used to steer more young people toward careers in skilled trades. And the immigration system should target people who can step into roles in residential construction.
“We need the population growth, but we also have to think about the type of workers we bring in,” said Dana Senagama, a market analyst at CMHC.
Alex Miller, the chief executive officer of Big Block Construction in Saskatoon, said his industry was “broken” and increasingly fragmented, with specialist roles needed at every point of the development process, from approvals through project completion. Rather than focus on labour, he said, the industry should find ways of boosting productivity, such as building more modular homes, which use prefabricated components.
“The definition of insanity is doing the same thing over and over and expecting a different result,” Mr. Miller said. “So part of me says, ‘Why are we looking at adding more labour?’ We’ve been trying to do that for 50 years. Maybe we should take a different approach.”
Matt Lundy is an economics reporter for The Globe and Mail’s Report on Business section.
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