Delayed construction projects in the GTA will hurt government revenues
The residential construction industry was granted essential workplace status under Ontario’s emergency orders during the COVID-19 pandemic. The industry was able to finish homes that were near completion and work on important infrastructure projects such as hospitals. Nevertheless, overall development and building projects across the GTA were delayed. This will have farreaching impacts on housing supply in an already tight market, as well as negative financial impacts on government coffers.
You may be thinking: If the industry was permitted to work, why are there delays? The response is a little complicated. Some municipalities had to adjust to working remotely, which slowed or stopped processing of planning and building applications that stalled developments and construction projects. Worksites had to adjust to COVID-19 protocols as social distancing rules negatively impacted productivity.
To get a better understanding of how the pandemic affected the building industry, BILD surveyed is members to understand how they were impacted. The survey found that there were 498 active projects in the GTA, representing 156,000 units at various stages of the development process. In Toronto alone, 276 projects were affected. The survey found that 65 per cent of active pre-construction projects reported delays of three to six months, and 32 per cent were greater than six months. Eighty-three per cent of not yet above grade projects reported delays of three to six months, and 11 per cent are greater than six months. Eighty-five per cent of projects under construction permitted for above grade reported a delay of three to six months, and five per cent are greater than six months.
The Altus Group examined this survey data and concluded that these delays will result in the loss of about 9,000 housing starts over the course of the next 18 months. This will delay occupancy of more than 8,000 units by the end of 2021, potentially exacerbating an already existing shortage of housing in the city of Toronto, reduce construction activity and see the loss of 10,000 jobs per year.
Federal, provincial and municipal government revenues will be detrimentally impacted by the loss of housing starts throughout 2020 and 2021. Lost revenues include $340 million in lost development charges, $13.5 million in lost education development charges (TCDSB), $26 million in property taxes, $364 million in HST, $53.8 million in provincial land transfer tax and $52.5 million in lost municipal land transfer tax.
Now more than ever, all levels of government must work together to make sure that proper measures are in place to remove barriers that will unlock consumer and industry construction investments to help kick-start the economy.
Dave Wilkes is President and CEO of the Building Industry and Land Development Association (BILD). bild.ca