Suburbs lead the way in housing completions as starts also climb: CMHC

The suburbs of Canada's three largest cities are fuelling an uptick in home construction, according to the Canada Mortgage and Housing Corporation (CMHC).

In two reports released Monday, the federal housing agency said the number of move-in ready homes outside of city centres in Toronto, Montreal and Vancouver has begun soaring. The number of urban properties starting construction is also edging up.

The availability of lots and affordable prices are pushing up housing completions in a roughly 30-kilometre radius outside the city centres, according to CMHC.

The number of housing completions has peaked in areas between 20 and 30 kilometres from Toronto and Vancouver's city centres, while Montreal's peak is even further, at above 30 kilometres, the agency said.

"Montreal has seen the strongest pattern for suburbanization, with the level of housing supply increasing with distance from the city centre and decreasing with population density,'' one report said.

Sprawl more limited in Vancouver

"Like Montreal, Toronto has experienced urban sprawl with a high level of housing development in remote suburbs," the report said. "However, Toronto has also seen a boom in housing construction in its active core.''

Urban sprawl is more limited in Vancouver because the area has a relatively stable level of construction in its urban areas, CMHC said.

Its study found that construction activity was the lowest between five and 10 kilometres outside the city centres it studied.

Condos were responsible for the bulk of completions close to the city centre, in comparison to single-family, semi-detached, row houses and rental units, which dominated elsewhere.

As one moves further away from the city centre, the condominium supply mainly decreases in Toronto and Montreal, CMHC said.

Two challenges

The trends are leading to two challenges.

"First, the increasing trend toward suburbanization may accelerate housing external costs (infrastructure investments, roadway congestion and greenhouse gas emissions),'' the report said.

"Second, the relatively low level of housing development in low-income areas in Montreal (and to a lesser degree in Toronto) may indicate affordability challenges in those neighbourhoods.''

The average family income in the Toronto, Vancouver and Montreal areas were respectively $98,635, $89,300 and $78,400, said CMHC.

When income rises in a city, so does the desire to relocate, CMHC said.

Since housing per square foot is cheaper at greater distances, consumers have an incentive to move to less central locations in order to buy a bigger dwelling, it said.

This leads to the richest families living in the suburbs, despite longer travel times.

CMHC's insights into housing completions came as it announced that the annual pace of housing starts rose 23.1 per cent in January, as single-family homes in Montreal started to reach their highest level since February 2008.

The seasonally adjusted annual rate of housing starts rose to 282,428 units in January.

Urban starts were up 27.7 per cent to 266,877 units, as starts of multi-unit buildings in cities rose 24.1 per cent to 193,328 units, and starts of single-family homes in cities rose 38.1 per cent to 73,549 units.

Rural starts were estimated at a seasonally adjusted annual rate of 15,551 units.

Kelowna snapshot

The month's figure included housing starts from Kelowna, after the region wasn't surveyed in December due to the COVID-19 pandemic.

The annual pace of housing starts excluding Kelowna was 281,389 units in January, up 22.7 per cent from 229,350 units in December.

The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 244,963 units in January, up from up from 238,747 units in December.