The cost to build new homes in Canada has been on the rise, and is having a direct impact on Metro Vancouver’s future stock of affordable housing projects.
A report authored by Metro Vancouver’s housing manager and director of housing planning, development and finance — Laurel Cowan and Jason Hingley — was provided to the regional government’s housing committee and the Metro Vancouver Housing Corporation (MVHC) board in late May. Since 2020, construction costs have notably increased, the report explains, a trend that is having a meaningful effect on affordable housing creation.
“Construction costs have seen unprecedented increases over the past two years, a trend that is significantly impacting Metro Vancouver Housing’s (MVH’s) development of affordable rental housing,” the report noted.
MVH, which operates affordable rental homes in 49 sites across the Metro Vancouver region, has a 10-year plan to expand its portfolio of affordable rental homes with a $100 million budget to support new development and redevelopment. However, construction cost challenges are pushing up the price of development and pose “uncertainty and financial risk for housing’s capital program.”
Using insights from Hanscomb Quantity Surveyors, MVH’s report found that prior to the COVID-19 pandemic, British Columbia had seen a “steady,” increase in construction escalation over the past decade, increases that fell within the 2.4 to 2.8 per cent range. As of January 2020, escalation rates across the province have surged approximately 15 per cent per year.
A series of factors have been identified as the root of rising costs, many of which stem from global supply chain issues, rising labour costs and material shortages.
For one, many people decided to make home renovations during the pandemic, leading to a shortage of materials and an increase in costs. The shutdown of sawmills and mild weather in B.C. made it more challenging to harvest logs which pushed up the price of lumber and other wood products. When it comes to material costs, lumber and plastics reported the most significant price increases, followed by concrete, steel and fixtures such as doors and windows.
Soaring fuel prices are another element of higher building costs. In the Lower Mainland, the housing report pointed out that fuel prices have risen between 25 per cent and 30 per cent to all-time highs over the past two years. As a result, the price of transporting materials has been affected, as well as the manufacturing of energy-intensive materials like steel, cement, brick and glass.
Geopolitical challenges such as the Russian invasion of Ukraine have also hit global markets and supply chains. Rising interest rates have limited the construction industry’s ability to borrow cash, a trend that will “impact project costs moving forward.”
“Location also plays a factor. Construction costs are even higher in B.C., and in particular the Lower Mainland due to higher housing costs which contribute to higher trade costs and shortages,” stated the report.
MVH said that it will continue to assess projected construction cost escalation and plans to report back to the committee and MVHC board with impacts to project budgets.
