New home construction in the Ottawa region declined 18 per cent in the first half of 2023 compared with a year earlier as a surge in apartment starts failed to offset a drop in new builds of other housing types, the Canada Mortgage and Housing Corp. says.
The housing agency says builders started work on 2,164 new apartment units, including condominiums and rentals, between January and the end of June, up 38 per cent from the same period in 2022.
Purpose-built rental starts rose 61 per cent year-over-year, posting record first-half gains as developers scrambled to meet growing demand for rental housing.
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Condo starts, meanwhile, rose just seven per cent, and CMHC noted that some condo projects that were stalled due to a lack of demand were shifted to purpose-built rental projects.
But starts of all other dwelling types, including semi-detached, single-detached and row houses, fell 45 per cent compared with a year earlier for a total of 1,410.
CMHC said the city recorded its lowest number of freehold housing starts in more than 25 years during the first half of 2023.
“Price increases, followed by high mortgage rates, reduced demand for these types of new dwellings,” the agency said in its latest housing supply report released Thursday, adding that “uncertainty surrounding rapidly rising financing costs also tempered builders’ willingness to start freehold units.”
CMHC said the decline in freehold starts moves Ottawa “further from the trajectory that residential construction needs to be on to restore affordability in the area.”
At the same time, the agency says the number of starts remains high relative to historic levels, noting the decrease follows three years of record-setting activity during the pandemic.
“For example, the number of housing starts in the first half of 2023 (nearly 3,600) outpaced starts from the same period in most years before the pandemic,” CMHC explained.
Despite the boom in new multi-unit starts, the agency says it will be difficult to maintain the heightened pace of apartment construction due to challenges facing developers, such as increased building costs and rising interest rates.
Of the six cities examined, CMHC says Vancouver and Toronto were the only ones that saw housing starts increase over the same period last year, recording 49 per cent and 32 per cent gains, respectively, and surpassing levels seen over the past five years.
In Montreal, there were 58 per cent fewer housing starts compared with the first half of 2022, while Edmonton saw a 29 per cent decrease and Calgary’s housing starts were flat.
The agency is forecasting strong rental demand in the second half of the year, reflecting higher barriers to home ownership caused by high prices and interest rates.
It says the overall level of new construction activity remains too low to address Canada’s affordability and housing supply crisis over the longer term, and “significant increases” in the construction industry’s productivity will be needed.
– With additional reporting from the Canadian Press
