Math is a funny thing, people seem to get scared by it quickly, but in our day to day lives it’s usually just basic adding and subtracting. That’s what makes home builders crying for more housing supply so interesting. Home builders are once again in the newspapers arguing that to solve the GTA’s high housing prices we need to build more homes. There never seem to be any definitive numbers in these articles, just blanket statements that all essentially say: lots of people are coming, so we need to build even more homes. But to determine if new builds are needed, it is just simple math. So, let’s go over the numbers to confirm if that’s true or not.
Luckily for all of us Better Dwelling already provided a lot of information on new construction numbers versus homes needed by population growth, so combining that with BILD’s monthly figures, this should be a straight forward process.
In the five years covered by the 2016 census, the GTA’s average annual population growth was 76,064 people. At the same time, the average household size in the GTA was 2.4 individuals. Taking these two numbers together (dividing 76,064 by 2.4) we can determine that the GTA needed to add 31,693 homes a year to welcome the newcomers.
Good news! It turns out the GTA did build enough homes in all but one of those five years and that the overall five-year average more than made up for that one short fall. In total, the gap was just over 16,000 extra homes built from 2011 to 2015. This would suggest developers are doing a great job keeping up with demand…assuming that homes are only being built to provide for the population growth.
Source: Altus Group, Better Dwelling, Six Housing Sense
Looking at the past couple of years, we see even stronger development levels. Building Industry and Land Development Association (BILD) reported that 47,161 new homes were purchased in 2016. From BILD’s monthly updates, 2017 provided another impressive year of well over 40,000 new homes sold (source: BILD, Altus Group). In January, Better Dwelling estimated that 57,674 new homes would reach completion in 2018. All of these figures show development rates easily in excess of the roughly 31,000 new homes needed to keep pace with the population. It could almost be argued the region is building too much.
So, the math would suggest that we are building more than enough new homes to keep pace with population growth; however, developers are saying we need to build more. Huh, math really is funny.