Hitting rock bottom can be a difficult and painful experience, but it can also be a catalyst for positive change and growth.
The residential construction industry is now at the nadir. But there is hope as governments are taking action to lower sales taxes, reduce red tape and speed up the approvals process for housing.
For example, the feds have committed to a rebate on the GST paid on new homes under $1 million for first-time buyers and in Ontario the government is thinking about following suit with the HST.
Such bold initiatives are commendable and have been suggested by RESCON for some time now. To revive the market, though, we must take it a step further and remove the GST and HST on all new housing. That would save purchasers of new homes $130,000 in sales tax on a $1-million home.
New home sales have tanked and there is little new construction being started. This does not bode well for our economy as it will create a ripple effect in sectors like engineering and manufacturing.
Canada’s residential construction industry accounts for $55.6 billion of Canada’s GDP of about $2.12 trillion and directly employs more than 600,000 workers. Overall, the construction industry accounts for seven per cent of our GDP, employing 1.6 million people, or about one in every 13 working Canadians.
New Home Sales Have Declined
Our two largest metropolitan areas – Toronto and Vancouver – experienced sharp pullbacks in 2024. Toronto housing starts fell by 20 per cent last year while starts in Vancouver declined 15 per cent.
Toronto-area new home sales are worse than during the 1990s housing market crash. In April, there were only 310 new home sales in the GTA, down 72 per cent from April 2024 and 89 per cent below the 10-year average. Condo sales were down 80 per cent in April year-over-year.
Numbers released recently by CMHC are eye-opening. In Toronto, it will take 58 months to sell the present inventory for pre-construction condominiums at the current rate of sales. Project cancellations have increased, and many units are unsold. In Toronto, 55 per cent of pre-construction units went unsold in the first quarter of 2025, marginally below the record high of 56 per cent at the end of 2024. Lenders typically require a pre-sale threshold of 70 per cent to release funds.
Lack of Housing Is a Problem
Housing affordability has worsened.
A productivity public opinion survey done recently by the Toronto Region Board of Trade found that 67 per cent of respondents cited housing as the most significant barrier to business growth in the region. Traffic congestion was the second at 57 per cent, followed by high taxes at 55 per cent.
Roughly two thirds of respondents were not confident that future generations will be able to afford to live and work in the Toronto region.
Meanwhile, a recent study by the Canadian Homebuilders’ Association revealed that housing affordability has worsened due in large part to municipal development charges and delays.
The report found that the period between 2022 and 2031 is on track to be the decade with the fewest homes built per new persons added to the Canadian population since at least 1972.
Middle-Class Workers Are Suffering
The situation is taking a huge toll on middle-class workers.
A call-to-action paper by CivicAction, a cross-sectoral group of leaders committed to taking comprehensive action on housing affordability, notes that due to unaffordable or unsuitable housing GTHA workers are facing the choice of remaining in unacceptable digs or moving away. These are skilled trades, teachers, nurses, personal support workers, and plenty of others.
The report’s findings reveal that addressing workforce housing is not simply a social imperative but an economic necessity for the continued prosperity of the GTHA.
Another downside is the effect on labour supply. With the market decline, trades, project managers and other professionals in the residential construction industry will be laid off. However, with an aging workforce and many individuals retiring, the industry will need workers. If employees leave now, they might not return in future, leaving the industry in dire straits.
BuildForce Canada reports that residential-sector employment will increase by six per cent above 2024 levels by 2034. This means the industry will need more workers. You can’t just turn the tap back on.
Disturbingly, a new report from RBC indicates that tackling Canada’s housing shortage will require $2 trillion in capital deployment over the next five years – a five-times increase from current levels.
Despite the government action to date, we have much work to do. The data will show if the steps taken have the desired effect. We currently doubt it and think further measures will be needed as soon as this fall.