Ontario budget causes a lot of doubts about the possibility to build promised 1.5M new homes

On Thursday, the Ontario provincial government released its 2023 budget called “Building a Strong Ontario”. An almost 200-page document points to the importance of housing and infrastructure investments. However, it doesn’t specify how exactly the goals will be reached.

The budget mainly continues earlier announced projects, e.g. the construction of Highway 413 and the redevelopment of Ontario Place. At the same time, some new initiatives were also added, including the possibility of new provincially protected land, which comes amid Doug Ford government’s plans to remove certain parts of the protected Greenbelt.

Real estate was unsurprisingly the main component of the budget, as Ontario residents keep struggling with the unaffordable cost of living. The budget’s housing-related initiatives focus on the Province’s goal to build 1.5M new homes by 2031. Once again, the province blamed “unnecessary red tape” for slowing down construction, while pointing to the latest initiatives to simplify planning approval processes, including the More Homes Built Faster Act. Many questions have already appeared concerning the province’s ability to reach such an ambitious goal, and the Province itself says that Ontario will need about 72,000 additional construction workers by 2027 in order to build 1.5M new homes before the deadline.

Almost 100,000 homes were built in Ontario last year, but specialists expect the number of housing starts to barely reach 80,000 per year during the next few years.

The forecasts were revised downward from the last year’s budget, including an estimate of 79,300 homes built in 2024, which is down from the 87,300 in the previous forecast.

“Ontario is dealing with a historic labour shortage in the construction segment showing over 28,000 vacancies in the third quarter of 2022. It’s more than double the number we’ve seen a year earlier,” – the Province says.

Trying to solve the issue, the Province plans to invest $224M in 2023-2024 for the Skills Development Fund to improve private-sector expertise and expand training centres. It will also invest an extra $25M during three years in the Ontario Immigrant Nominee Program in an attempt to attract more skilled workers.

According to the budget, we’ll see a decline in housing starts in both 2023 and 2024, falling to 80,300 and 79,300, respectively, which is much less than the 96,100 starts reported last year. In 2025, Ontario is expected to show 82,700 starts, which will go up slightly to 83,200 in 2026. As a result, the province will have more than 1M new homes to build to reach the set goal. Nevertheless, Orencsak says those numbers “don’t fully include all of the government’s future plans.”

Trying to encourage development and improve affordability, the budget calls on the federal government to defer HST on all new large-scale purpose-built rental housing projects. “Ontario will support this measure as it will increase the construction pace for rental housing units, create new jobs, encourage economic development, and support growth,” – the Province noted.

In addition to it, the Province announced plans to keep focusing on the development of transit-oriented communities by increasing the number of building partners for future transit stations along new subway lines, such as Corktown, Queen-Spadina, King-Bathurst, and Exhibition stations.