Regina’s residential construction industry is experiencing a heavy downturn, with this year’s housing starts on track to be the lowest in 11 years.
A new report from the Regina and Region Home Builders’ Association has put most of the blame on mortgage stress testing rules, which it said is raising the barrier to home ownership. The association estimates home ownership in the city has now sunk to 66 per cent, the lowest since 1996.
There were 111 residential building permits issued in the Regina region in the first quarter of 2019, a 67.4 per cent decrease compared to the same period last year. The drop was primarily driven by a 72.5 per cent decrease in the construction of multi-family homes.
Stu Niebergall, the president and CEO of the builders’ association, described the state of Regina’s residential construction industry as being in a “deep recession,” resulting in job losses.
“Those employed in the residential construction industry have been losing their livelihood. We need public policy decision-makers to turn the tide of continually increasing the cost and limiting the access to homeownership. If there was ever a time to find ways to reduce taxation and fees on new homes and recalibrate mortgage rules and stress tests, it would be now,” said Nierbgall in the report.
He said the province’s move to expand the provincial sales tax (PST) to include the cost of construction labour has been a factor, but pointed to last year’s changes in mortgage stress testing rules — requiring buyers to qualify for a mortgage at a higher rate — as the biggest challenge. The policy changes were an effort to cool off housing markets in Vancouver and Toronto, but members of the Regina industry believe the city was unfairly lumped in with those larger centres.
Niebergall said this has led to fewer people qualifying for home ownership, putting “downward pressure” on housing starts. He said the Canada Mortgage and Housing Corporation (CMHC) trend shows Regina is likely to see 545 housing starts in 2019, the lowest since 1998.
This slowdown has led to job losses in the residential construction sector. Nierbergall estimated that since 2016, close to 3,000 jobs in the city’s construction sector have been lost.
Jason Carlston, the regional vice president of land for Homes by Dream, said the company recently had to eliminate 10 office and work site jobs. Carlston said other builders that Dream works with have also done the same.
“We’re staffed for a much larger volume of homes,” he said. “But over the last couple of years it’s really decreased, like community-wide, and I think all home builders have suffered and had to adjust to that.”
Jeff Marchigiano, the sales manager for Gilroy Homes, said the company cut half its construction staff in 2018. He said Gilroy is still doing well despite the state of the industry, but its construction workers are feeling the pressure of the market.
“When I sell a house, now I get 20 or 30 guys coming in and saying thank you, because I’m providing them with work cause these guys are so starving,” said Marchigiano.
Jeff Bashutski, president of Crawford Homes, said the company is currently at eight housing starts this year, half the number during the same period last year. He estimated the company recently laid off four or five people. Bashutski echoed concerns that the stress test rules are turning away a number of potential clients.
“I’ve never seen so many potential buyers that looked good on paper go to bankers and get turned down,” said Bashutski.
Combined with the PST changes, as well as aluminum and steel tariffs from the U.S., Bashutski said there’s a “perfect storm” of challenges facing home builders.
Niebergall would like to see the federal government implement exemptions to the stress test for mortgage holders, and give qualified first-time home buyers access to mortgage amortization periods of up to 30 years for insured mortgages. He also wants the province to “tweak” its expansion of the PST.
“We’re not asking for handouts,” said Nierbergall. “We’re asking them to make some minor adjustments that would have a positive impact on the housing sector at this particular time.”