If the latest housing starts and sales forecasts are correct, and I have no reason to believe otherwise, the residential construction industry is in for its share of adversity over the next few years.
The grim situation will have significant repercussions for our economy. Workers will be laid off and forced to seek opportunities elsewhere. Many of these skilled men and women will not return to the industry.
We are staring into the abyss just now. Layoffs have started. Already, we are seeing tenders being delayed or scaled back. Some new developments are on hold.
The knock-on effects could be catastrophic. All three levels of government stand to lose billions of dollars in taxes, development charges, permit fees and GST and HST from construction activity.
The latest statistics are not encouraging.
Condo sales in Toronto, which includes resale, new and pre-construction units, fell 75 per cent between mid-2022 and the end of the first quarter of 2025, according to an analysis released recently by CMHC. In Vancouver, sales of condo units declined by 37 per cent over the same period.
In Ontario, housing starts in the first quarter of 2025 totalled 12,700 units. That’s a 20.2-per-cent drop from the fourth quarter of 2024, marking the lowest level of starts since the fourth quarter of 2009.
In Toronto, housing starts declined 58 per cent in the first five months of 2025, and 29 per cent in the rest of the GTA, compared to the same period in 2024. Sales of new single-family homes in the GTA were down 73 per cent from 10-year averages and new condo sales were down 90 per cent.
As for labour, Ontario has shed nearly 12,000 construction jobs over the last year, according to the Missing Middle Initiative. But it could get worse.
Peter Norman, economic strategist at Altus Group, says there are 536,300 jobs in the new construction sector in Canada, and based on the current state of preconstruction home sales, 105,000 to 170,000 jobs are at risk.
I was curious as to what the effects of the drop in housing construction would have on direct construction jobs and indirect employment in Ontario. The results were disturbing, to say the least.
I did some modelling and found that a 30-per-cent decline in industry activity would result in 121,500 total job losses, a 50-per-cent drop would result in 202,500, and an 80-per-cent dip would total 324,000.
Job losses would cut across the board and include everybody involved in construction of a new home – framers, electricians, plumbers, site managers, engineers, suppliers and distributors.
It would also include others like realtors and appraisers, inspectors and many more.
Residential construction work is most often done by small and medium-sized contractors who do not have the funds to survive a large revenue decline. Many of these operations would shut down.
This would have a ripple effect on supply chains. Industries like lumber, drywall, roofing and windows would be forced to scale back production or lay off workers. A recovery would take years.
Fewer jobs in construction also means lower disposable income in many communities, along with declines in retail, hospitality and local services dependent on construction workers.
Worse, there is no guarantee the skilled workers who leave the industry will return if the situation improves. In fact, it is likely the opposite. This will leave the sector with a shortage of workers.
The construction sector contributes seven to eight per cent of Ontario’s GDP, with the residential sector representing a large share of that. An 80-per-cent drop in housing construction could reduce provincial GDP growth by 1.5 to 2.5 percentage points and push us into a recession.
To fix the problem, we must bring down the cost of housing by cutting taxes, fees, levies and development charges and reducing red tape which only adds to approval timelines and hikes costs.
Adjusted for inflation, home prices have doubled, and in some cases more than doubled, across Ontario over the past two decades, while real wages have increased by 16 per cent. Single-family home prices exceed 11 times middle-class incomes. Twenty years ago, it was less than six.
The alphabet soup of taxes makes up 36 of the cost of new homes today, up from 24 per cent in 2012. In some instances, they have been raised by up to 1,000 per cent in a decade. Such increases are crippling the market as the costs are ultimately passed on in higher costs to buyers. Housing is an essential need like food. Yet it is being taxed like alcohol and cigarettes.
A new report by CivicAction confirms what most of us already know. Middle-income workers in the GTHA are being forced to leave the region because of housing unaffordability. Between 2014 and 2024, more than 500,000 residents left the GTHA, citing high housing costs. Authors of the report say that when you do the math, it amounts to a $7.5 billion annual loss in GDP.
Considering the stakes, it is critical that we reduce the tax burden on new housing. Middle-income workers must be able to afford to live where they work. Our economic health depends on it.
Richard Lyall is president of the Residential Construction Council of Ontario. He has represented the building industry in Ontario since 1991. Contact him at [email protected].
