Hamilton’s housing market has taken a historic hit. The new construction industry has not been this slow since the early 1990’s and by many measures it is worse. Last week The Spec reported that re-sale home prices have fallen 27 percent since 2022. Homes that sold at the height of the market have since resold for hundreds of thousands of dollars less. This is welcome reprieve for those struggling with affordability, but beneath the headline lies the troubling reality that we remain deep in a housing supply crisis.
We are not building enough homes to meet population growth or demand. As purchase prices fall, the economics of building new housing have collapsed due to high building costs, fees and taxes. The cost of delivering new homes far exceeds what the market will bear. Home builders cannot make the math work. When projects don’t pencil out, they don’t get built which further exacerbates the housing supply crisis.
The collapse of new home construction is crippling our economy and putting thousands of local, well-paying jobs at risk. Research by the Missing Middle Initiative found that Hamilton lost 1,931 residential construction jobs in the first six months of this year. To put that in perspective, the entire Stelco plant employs about 750 people. These are skilled workers who are being sent home because projects are no longer financially viable. This has created a paradox that should alarm us all – housing is becoming both unaffordable and unavailable.
The West End Home Builders’ Association (WE HBA) fears that neither the public nor policymakers fully grasp the severity of this downturn. Without urgent action, we will fall even further behind on our housing targets and hollow out a key pillar of our local economy. It’s past time for all three levels of government to do their part.
The federal government completely missed the mark by announcing a GST rebate that is restricted only for new homes purchased by first-time homebuyers. The problem is first-time buyers represent only about 5 per cent of new home purchasers. Without expanding the policy to include move-up buyers and down-sizers it will do next to nothing to stimulate housing supply, promote generational fairness and keep people employed. To truly restore viability to new housing projects and get construction workers back on the job, the rebate must apply to all new home purchases.
However, removing the GST is not a magic bullet. To save jobs in the housing sector and enhance affordability, all levels of government must do their part. Over the past five years, construction costs, and municipal fees have skyrocketed. Municipal development charges can exceed $100,000 per home and have grown at an unchecked pace over the past decade. In Hamilton, while inflation rose buy less than 30% over the past decade, development charges have surged by a whopping 227%. These fees are charged upfront, before the full burden of the HST, meaning buyers are literally paying 13 per cent tax on other taxes. The math on building new housing supply simply doesn’t work anymore.
Halving these fees, as the Liberal government proposed on the campaign trail, would make far more projects financially viable. Unfortunately, the federal budget presented no new measures to unlock supply and restore affordability. The federal approach remains focused on incremental change rather than transformative action.
The housing slowdown is a real and immediate threat to our economy. In recent weeks a large project in downtown Hamilton consisting of hundreds of new housing units was cancelled, costing hundreds of well-paying jobs. Without aggressive and swift action, more cancellations loom on the horizon.
Expanding the GST/HST rebate to all new homes, not just for first-time buyers and reducing development charges must be top priorities. These measures would make projects viable again and get people back to work building the homes we urgently need.
Home builders are ready to do their part. But they can’t do it alone. It’s time for all levels of government, with leadership from Ottawa, to step up, clear the path, and help get our housing system back on solid ground.
