Demand for rental units pushes Ottawa housing starts to all-time high in 2022: CMHC

Apartment construction

Housing starts in Ottawa hit a new high in 2022 as surging demand for rental apartments and condos fuelled a construction boom in multi-residential properties, the Canada Mortgage and Housing Corp. says.

Builders in Ottawa launched 11,032 new housing units last year, an eight per cent increase from 2021, the national housing agency says in its latest Housing Supply Report released Wednesday.

Apartments and condos accounted for 52 per cent of those starts, CMHC said. It marked the first time in more than 20 years that new builds of purpose-built rental and condominium suites surpassed starts of single-detached and row houses.

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The agency said soaring house prices and rising interest rates that make borrowing to buy a home more expensive have ratcheted up demand for new rental units. There were 2,818 rental units started in 2022, up from 1,196 the previous year.

CMHC also cited strong immigration and the return of students to university campuses as other key factors driving demand for rental housing. 

“As a result, in 2022, the vacancy rate on the rental market decreased to 2.1 (per cent), and rents increased considerably,” the report said. “The pandemic also delayed starts of a number of large-scale projects, which were finally shovel-ready in 2022. All of these factors led to an unusually high level of activity on the rental market.”

Meanwhile, a record 2,891 condominium starts were recorded in 2022, exceeding the high-water mark set the previous year by seven per cent, CMHC said. 

With larger houses out of many buyers’ price range, the agency said “a portion of demand shifted to less expensive homes, such as condominiums.”

Only 17 new condo units remained unsold in Ottawa in December, according to CMHC, similar to 2021’s numbers but “significantly below” the five-year average. 

“Despite recent strong construction levels, this low stock reflects sustained demand for this housing type in the area,” the agency said.  

Most multi-unit construction occurred inside the Greenbelt, CMHC said. Popular areas for new condos and apartments included the downtown core, Westboro North/Tunney’s Pasture, West Centretown/Fisher Park and Iris/Queensway Terrace/Whitehaven, while Lowertown was a hot spot for condo activity, CMHC said.

Many of these projects are located in densely populated areas where land is more expensive, the agency noted, prompting builders to look skyward to accommodate more units.

The average height of a new apartment building in Ottawa rose from 5.1 storeys in 2021 to 7.3 storeys in 2022, CMHC said, with about 10 per cent of new projects soaring more than 20 storeys. 

A quarter of all new apartment builds in Ottawa last year contained more than 100 units, up from 12.8 per cent a year earlier.

Still, while demand for rental units and condos remains strong, CMHC warned that “activity for both condominiums and rental units could slow down in the coming years as funding for new projects is affected by rising interest rates.”

At the same time, rising real estate costs dampened demand for larger housing types last year, the agency said. 

Multi-detached starts fell 22 per cent from 2021, falling slightly below the five-year average. Meanwhile, row house starts dipped nine per cent as the price gap between those units and cheaper housing types like condominiums widened.  

Most single-detached and townhouse starts were concentrated in suburban areas such as Barrhaven, Gloucester, Orléans, Kanata and Stittsville, CMHC said. Ottawa West and Clarence-Rockland were also strong nodes for construction activity.

The report comes the same day that CMHC reported that the annual pace of housing starts in Ottawa-Gatineau rose eight per cent in March.

The housing agency says the seasonally adjusted annual rate of housing starts for the third month of the year was 15,709 units compared with 14,527 in February.

The rate – a rolling average designed to smooth out monthly fluctuations – more than doubled in Ottawa last month, rising to 13,893 from 6,397 in February. In Gatineau, however, the annual rate of starts plummeted to 1,816, down from 8,130 the previous month.

Meanwhile, builders in Ottawa-Gatineau started work on 1,284 housing units last month, down three per cent from March 2022.

Starts in Ottawa rose 44 per cent to 1,151. Continuing the trend of the previous year, multi-unit starts of rental apartments and condos jumped 59 per cent to 1,052, while single-detached starts dropped 27 per cent to 99.

Gatineau builders launched 133 new units last month, down from 521 a year earlier. There were 103 multi-unit starts in March, compared with 457 a year earlier, while single-detached starts dropped from 64 in March 2022 to 30 last month.

Nationally, CMHC says the annual pace of housing starts in March fell 11 per cent compared with February.

The housing agency says the seasonally adjusted annual rate of housing starts in March came in at 213,865 units, down from 240,927 in February.

The drop came as the annual rate of urban starts in the month fell 12 per cent with 192,545 units.

The annual rate of multi-unit urban starts fell 11 per cent to 151,769 for March, while the pace of single-detached urban starts fell 16 per cent to 40,776.

The annual rate of rural starts was estimated at 21,320 units for the month.

The six-month moving average of the monthly seasonally adjusted annual rate was 240,669 in March, down six per cent from 254,658 in February.

– With additional reporting from the Canadian Press

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