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Builders Gloomy Over House Starts

Summary: Canadian house construction activity in 1995 was the flattest in 35 years. Despite low interest rates, this year could be even worse.

By By Robert Forrest
Copyright 1996. Contact publisher for permission to use.

“We have just experienced the worst year of new housing activity in 35 years,” Gerhard (Jerry) Roehr, president of the Canadian Home Builders Association (CHBA), told his group at their annual meeting in Vancouver in February of this year. “If we take Canada’s population size into account, it was the worst year since the second World War.”

The situation may not be improving sub-stantially in 1996. Canada Mortgage and Housing Corporation (CMHC) has predicted that new housing starts for the cur-rent year will be up about 10,000 over 1995 to 120,500 starts. “We don’t know how the figures will work out,” says Roehr. The CHBA annual Pulse Survey of members indicates the people who build the houses expect only 105,000 starts, d own from 111,000 in 1995.

Over the period 1991 to 1994, starts average d 158,000 annually. The Survey indicates a decline in housing starts in all provinces except New Brunswick, Saskatchewan and Alberta. Based on demographics, Canada needs between 153,000 and 165,000 housing starts annually, according to CMHC studies.

That is a shortfall of about 50,000 homes and 150,000 unrealized potential jobs, according to the CHBA. For manufacturers supplying the housing industry, 1996 doesn’t look good, either. Of 40 companies surveyed by the CHBA, three out of four predicted lower sales in 1995 compared to 1994. Only Alberta anticipates an increase in sales.

Almost half reported permanent closure of parts of their operations with attendant job losses. Ontario and Quebec were hardest hit in the area of closures. Why is the housing industry performing below expectations? Analysts see high interest rates, high consumer debt, the decline in real income, a surplus of existing housing in some regional markets, and a decline in real estate prices, coupled with a corresponding loss of equity by home owners in many markets across the coun-try, as contributing factors.

But Roehr calls these reasons “symptoms of a more serious p ro blem: the disenfranchisement of Canadians in their own economy.” Despite its recent poor performance, Roehr sees the Canadian housing industry as one with a great potential. “Demographic housing requirements are more than sufficient to sustain a healthy level of new housing activity,” he told his February audience. Roehr believes that lack of commitment by government is a problem.

He points out that both the Government of the United Kingdom and the President of the United States have taken favourable stands on the issue of home ownership. “It is high time for the Canadian govern-ment to make just such statements of commitment and understanding,” Roehr say s . “Home purchase and home renovations are of central importance to a vast array of other industries, such as forestry, the manufacturers of building products, service industries such as finance and insurance, the appliance industry, and the producers of such soft goods as draperies and carpets.

Even so, Roehr is quick to point out that the industry is currently performing well below demographic housing needs. “The question is why are we underperforming?” Roehr also expressed concern about changes in the mandate of CMHC. “Will CMHC continue to be a forceful factor in the housing industry or will it be eventually dismantled?” he asks.

“Deficit reduction has to be a primary concern but it is not the answer to all woes,” Roehr continues. “If the federal government is hiding behind deficit reduction, they will not achieve their goals because job creation and the consumer confidence in the economy will not be there.” “What we are looking for in Canada is a national housing strategy which has to address a number of issues. If the United States can do it, if the United Kingdom can do it, if Australia can a dd ress t he under-ground economy by registering in a certain way what has happened so the value-added taxes can be addressed, it will all help. But our federal government hasn’t done anything.”

“What is required now is a fundamental and unequivocal statement from the federal government that it supports home ownership and choice in market rental housing,” Roehr re c e n t ly told an audience in Oshawa, Ont. “The absence of such a statement is a national disgrace.” But Roehr doesn’t let the provinces off the hook. “Provincial government cooperation and support are vital for the development of a national housing strat egy. Provincial governments too must declare their commitment to housing,” he said.

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