Lack of new residential construction caused by the most severe housing market correction in a generation is catastrophic in and of itself. However, the grim situation will also spur significant knock-on effects that will have long-lasting implications on the economy and labour force.
Hefty hikes over the years in taxes, fees, levies and development charges on new housing have made new homes unaffordable for middle-class families. As a result, housing and condo sales and starts have declined at a rapid clip and some firms have been forced to lay off workers.
The bleak situation has also resulted in an exodus of middle-class skilled workers from the GTHA as they search for more affordable housing elsewhere.
Latest reports indicate that Ontario has shed nearly 12,000 construction jobs over the last year. But it could just be the tip of the iceberg. Peter Norman, economic strategist at Altus Group, says based on the current state of preconstruction home sales, 105,000 to 170,000 jobs are at risk across Canada.
Housing starts in the province in the first quarter of 2025 totalled 12,700 units – 20.2-per-cent below the figure for the fourth quarter of 2024.
Housing starts were down 58 per cent in Toronto and 29 per cent in the rest of the GTA during the first five months of 2025, compared to the same period in 2024.
New home sales paint an even more bleak picture, with the sale of new single-family homes in the GTA down 73 per cent from 10-year averages and new condo sales down about 90 per cent.
The condo market has been hardest hit. CMHC revealed that Toronto’s condo sales fell 75 per cent between mid-2022 and the end of Q1 2025.
Cost of Building Is Too Steep
The cost of housing is simply too high for builders to build and people to buy. Real wages have increased by 16 per cent over the past two decades, yet home prices, when adjusted for the rise in inflation, have doubled and in some cases more than doubled. Single-family home prices now exceed 11 times middle-class incomes. Twenty years ago, it was less than six.
The alphabet soup of government-imposed taxes, fees and levies are the main reasons for the uptick. Presently, the taxes make up 36 of the cost of a new home, up from 24 per cent in 2012. The hikes are crippling the market as the costs are ultimately passed on in higher costs to buyers.
The human costs of lack of housing were highlighted in a research paper produced recently by CivicAction.
The paper revealed that, over the past decade, 522,191 GTHA residents moved to other Ontario regions or other provinces because housing was too expensive. This means that for every two international immigrants settling in the GTHA, one resident leaves for more affordable areas. Thirty-seven per cent of the families that are leaving are between ages 25 and 39.
These middle-income earners are the backbone of our neighbourhoods and communities. Many of them are construction and skilled trades workers who build our housing and infrastructure.
The CivicAction report found that the annual income needed to purchase an average home has reached $234,981 in Toronto, compared to actual annual median household incomes of $100,401.
As the report notes, the consequences of inaction on middle-income workforce housing have reached a critical inflection point where they threaten the fundamental functioning of our region, our provincial and national economies, as well as our cities, towns, and communities.
Couldn’t agree more.
The exodus of workers translates into $5.88 to $7.98 billion annually in direct economic losses to the GTHA economy.
Job Losses Will Add Up
I did some modelling of my own, with the help of ChatGPT, and found that a 30-per-cent decline in industry activity in Ontario would result in a total of 121,500 direct and indirect industry job losses and $12.4 billion in lost GDP, a 50-per-cent drop would result in 202,500 job losses and $20.6 billion in lost GDP, while an 80-per-cent dip would total 324,000 job losses and $48 billion in lost GDP.
Many of the job losses would include framers, electricians, plumbers, site managers, engineers, suppliers, distributors and others like realtors, appraisers and inspectors. And, since much of the residential construction work is done by small and medium-sized contractors, many of these operations would not be able to survive and eventually shut down.
In turn, this would affect supply chains, which would also end up laying off workers, and other industries that are dependent on construction. There’s also a good chance that workers who leave construction in order to earn a living will not return when the industry picks up again.
This will leave us short of workers at the very time the industry is in recovery and most in need of talent.
It is critical that we take steps now to bring down the cost of housing by lowering government-controlled costs. Our economy depends on it.