Ottawa housing starts hit five-decade high, but still don't meet demand: CMHC

Housing starts

Housing starts in Ottawa soared to their highest level in almost 50 years in 2021 – but that flurry of new construction still wasn’t enough to meet surging demand, the Canada Mortgage and Housing Corp. says.

Builders began work on more than 10,000 new housing units in the capital last year, CMHC said in its latest housing supply report released on Tuesday. 

That’s significantly higher than Ottawa’s five-year average of about 6,600 starts. But the federal housing agency said the city’s population is still growing at a faster rate than housing starts – a situation it says “may have contributed to the upward pressure on average home prices seen on the resale market.”

The report comes in the wake of recent outlooks from CMHC and realty giant Royal LePage that suggest local home prices will keep rising throughout the rest of 2022 and beyond.

In its most recent market forecast, CMHC predicted the average price of a dwelling in Ottawa could hit $750,000 this year, an increase of nearly 16 per cent over 2021’s overall average of $648,099. The agency’s long-term projections say average prices could increase to as much as $795,000 next year and $840,000 in 2024.

Row houses popular

Meanwhile, Royal LePage is forecasting that the aggregate price of a home in Ottawa will jump 13 per cent by the fourth quarter of 2022 compared with the same period a year earlier, an upward revision from its previous prediction in December that aggregate prices would rise nine per cent over the course of the year.

About two-thirds of last year’s housing starts were in the suburbs, CMHC said, particularly in areas just outside the Greenbelt. 

Row houses account for about a third of all new construction, the agency said – a higher proportion than in other cities it surveyed. CMHC said row houses’ relatively affordability compared with condos and single-detached houses as well as rules limiting single-detached starts to 55 per cent of all new development contributed to their popularity in the capital.

Barrhaven, Gloucester, West Orléans and Stittsville were cited as regions that saw significant numbers of row house starts in 2021. 

While freehold homes still make up the majority of starts, CMHC noted that apartment construction is claiming a growing share of new housing activity as developers have scrambled to meet pent-up demand for condominiums and rental suites over the past decade.

Nearly 40 per cent of all starts in 2021 were apartments, up from about 10 per cent in the early 2000s. A quarter of those starts were concentrated in four neighbourhoods near existing or future LRT stations, including Hunt Club/South Keys, Westboro North, Hampton Park and Little Italy.

“The municipality’s official plan adopted in 2003 included strategic directions in favour of urban densification, which may have encouraged this change,” the agency said.