Cost of material and land makes it hard to keep houses affordable, say developers

Demand for homes are up, but since the pandemic construction and land costs have made it harder for local developers to keep houses affordable.

Ted Russell, vice president of Crescent Homes in Waterloo, said the demand for homes was almost overwhelming before the recent interest rate hikes,

"We couldn't even keep up with the amount of people wanting homes from us and we couldn't even get enough trades to build the houses fast enough," he told CBC Kitchener-Waterloo's The Morning Edition.

But some of the biggest challenges facing developers in the construction industry is affordability of land and cost of materials.

"With the recent inflation we've seen, some of the trades were seeing 40 to 50 per cent increase in costs since COVID," he said, which makes the balance of affordability that much harder.

Ontario's More Homes Built Faster Act, also known as Bill 23, aims to accelerate the construction of 1.5 million new homes over the next 10 years. Cities of Kitchener, Waterloo and Cambridge have all pledged to build thousand of homes as part of the Bill 23 by 2031. 

Time adds to costs

Time also adds to a developer's expense and their ability to build homes faster. Habitat for Humanity Waterloo Region's CEO Philip Mills says they work with generous people in the construction industry that help them build homes, but in a manner that works for them, which often means projects take longer to finish.

"We're happy to take their work and their labour when it makes sense for them, but that means then we might not move as quickly as we wanted to," Mills told The Morning Edition.

"That becomes the trade off of all construction, there's a cost measure but there's a time measure. The longer it takes us to build, the more expensive it gets because you're talking about carrying debt, paying people over longer periods of time who are doing some of the labour for you."

Habitat for Humanity builds new homes in the community and families who are part of their program pay a geared-to-income mortgage, set at 25 per cent of the gross household income. Mills said the number of families applying for their program has grown in recent years. 

Another aspect that adds time is the process of working with municipalities to get land to a shovel-ready state. Russell and Mills said there are a lot of steps involved, which can add to their timeline.

"A lot of times it's moving the land through the process with the city, different studies done by our engineers and our planners," Russell said. "There's a lot of back and forth that seems to take longer than it should."

It's also a labour issue Mills added.

"You got a city working flat out as much as they can do with a construction industry working as fast at they can because we realize there's such a need," he said.

Hopeful there will be enough housing

In July, Habitat for Humanity launched the Build Now project, which aims to build 10,000 attainable and affordable in the next seven years by working with developers, municipalities and other groups to reduce the cost of housing.

"Anyone who has looked at land knows it is incredibly expensive and so this project is predicated on cheap or free land," Mills said, adding that Bill 23 is waving developer charges and developers who are part of the project forging their profits, he believes they can get costs down by half.

Both Mills and Russell say despite the current challenges, they are hopeful enough housing can be built in the community.

"Ever since COVID, there's been a lot of uncertainty," Russell said.

"I think once we get settled through the storm and interest rates bring a sense of normalcy, it may take some time but everything will get levelled out and we can get back to business."

Mills believes Waterloo region will be able to find a solution together.

"This is a community that has come together a lot of times before and cares about itself and cares about the people who live here and so I think we will find a solution as Waterloo region is known to do because we need a solution," Mills said.

Give me shelter: The hunt for housing in Waterloo region is a series by CBC Kitchener-Waterloo that hears from the people struggling to secure the housing they want and need. They might be making do with non-traditional housing: a tent, a room shared with multiple people or their parents' basement. We look at how the basic need for housing is not being met for many people in a rapidly growing region of Ontario.