Amid push for more housing, construction costs remain 'stratospheric'

As governments at all levels grapple with how to boost housing supply for would-be homeowners and renters who are seeing prices soar out of reach, those involved in building the roofs over people's heads say they're also facing labour bottlenecks and "stratospheric" prices for materials.

The federal government made housing a key plank of its budget last week and the Ontario government has introduced a bill to speed up municipal approvals of developments, at a time when the average resale price of a house in Ottawa hit $853,615 in March.

Meanwhile, the costs of residential construction at the end of 2021 had soared 24.4 per cent in Ottawa over the year before, according to Statistics Canada's quarterly construction index. It tracks the value of a contractor's materials, labour, equipment, and profit to construct a new building in 11 Canadian cities.

The beginning of the pandemic brought sticker shock over the price of lumber — supply chains were disrupted at the same time as people jumped into renovating — but David Schoonjans says the cost of building hasn't settled down.

As a senior director and cost consultant for Altus Group, Schoonjans also knows construction costs inside out. He compiles a report that lays out what it costs to build different types of public and private buildings and infrastructure in each city.

These days, he says, commodity prices remain high, especially for the rebar or reinforcing steel that goes into concrete. Meanwhile, many construction projects are taking place, and the war in Ukraine has upset trade.

"It's a lot of things all compounding. A perfect storm, as they say," said Schoonjans.

Labour shortage

Schoonjans said one of the biggest costs, especially with multi-family buildings or high-rises, is for the skilled labour to create moulds into which concrete is poured.

People with those skills tend to work for local companies focused on individual cities, and there aren't nearly enough workers, so prices have more than doubled in recent years, he said.

"You can't snap your fingers and have a journeyman carpenter tomorrow. It's very difficult to ramp up capacity."

Richard Lyall, president of the Residential Construction Council of Ontario, agrees that the key shortage is among those who work with concrete, or lay tiles and brick.

He's confident the industry can build what's needed, but says immigration of skilled tradespeople has long been "deficient."

"We're not building enough housing, and we need to build more. To do that we will need more skilled trades," said Lyall.

The federal budget includes money to train 3,500 apprentices from underrepresented groups and give tradespeople a tax deduction when they move to take on a job. That said, Ontario alone could see 90,000 construction workers retire by 2030, Lyall points out.

Factory-built solutions

The problems of unpredictable construction prices are also affecting affordable housing projects led by non-profit groups, at a time when the housing crisis is worsening, said the head of the John Howard Society in Ottawa.

It hopes to open a new headquarters and 40 supportive housing units on Carling Avenue in September, and is building 29 units on Lisgar Street downtown for women who are homeless, including Indigenous women.

In both cases, executive director Tyler Fainstat says the organization's backers are helping it with extra funding to weather the price hikes. The projects are more expensive than they would have been a few years ago.

"We're always looking to find ways to build housing quicker, and more cost-effectively, to be able to get as many units online for folks experiencing homelessness," said Fainstat.

The Carling Avenue project has been assembled from modules built in a Toronto-area factory, while the Lisgar Street units use pre-fabricated wall panels.

The construction industry, too, is pursuing "innovative" options to automate work off-site, said Lyall, as a solution to deal with labour shortages.

Lyall and Schoonjans agree governments should help boost housing supply on the private market by improving immigration of in-demand tradespeople, and ensuring municipalities approve permits before a project's financial model is affected by rising costs.

"But just pouring money into [housing], you're adding fuel to the fire," suggests Schoonjans. "It's not due to a lack of money to build these things. There's plenty of money ready to invest in a financially viable project."

Governments can't do much about world commodity prices either, notes Schoonjans.

"Some of these commodity prices are in the absolute stratosphere. They can't and won't stay up there forever," said Schoonjans. "The question is how long? I think it could be longer than people are expecting."