Alberta residential builders say government regulations are hurting an already difficult economic landscape for the industry.
According to the Building Industry and Land Development Alberta Association (BILD Alberta), there are more than 5,000 unabsorbed new homes on the market, resulting in a significant reduction in housing starts. BILD Alberta represents 1,800 land developers, homebuilders and renovators in the province.
“It’s building codes, there are net-zero priorities for some municipalities and all of those changes increase the cost to the homeowner,” said Carmen Wyton, BILD Alberta CEO. “At the end of the day, the homeowner pays but it doesn’t increase the value of their house.”
She explained several major issues have arisen recently that has BILD concerned. She said new mortgage rules introduced earlier this year have cooled the housing market across the country. And proposed changes like Alberta’s Bill 32 could hurt the industry more.
Bill 32 would broaden the use of off-site levies in new kinds of developments in Calgary and Edmonton. It would also give cities more power to add levies at their discretion.
New mortgage rules introduced late last year from the Office of the Superintendent of Financial Institutions now require borrowers with uninsured mortgages (those putting a down payment of 20 per cent or more) to undergo a stress test. Uninsured borrowers must now qualify at a new minimum rate — the greater of the Bank of Canada’s five-year benchmark rate or 200 basis points higher than their mortgage rate.
Wyton stated the economic downturn in the province coupled with the weight of local and federal regulations have pushed the cost of homes higher and higher and are devastating the industry.
“Things have been declining for the past decade, but we have been hit the hardest in the past four years,” Wyton said. “Within our members we have seen 10 to 25 per cent job layoffs – much of that in the past several years and probably more to come.”
Wyton said the best opportunity is for residential builders to better conversations with government at all levels and develop solutions in Alberta.
“For example, we have the Alberta Bank (ATB) which doesn’t have to follow national bank rules and could be a bridge to qualify for a mortgage,” said Wyton. “We need to approach all this with creative thinking.”
Wyton added that BILD Alberta currently has a pending meeting with Premier Rachel Notley and has sent letters out to MLAs about development concerns.
“We will always talk to government,” Wyton said. “We need some disruptive thinking for how to solve the problems plaguing the residential construction industry. It is easier to do business in other provinces and in the U.S. We need to make it easy to do business here.”