Housing starts plummet as market cools in Greater Sudbury

A local homebuilder is considering leaving the Greater Sudbury, a result of high costs of building in the city and a softening housing market in the short and long-term.

The builder, who asked his name not be used because he hasn't made a final decision, said he's considering a move south as the once red-hot housing market in Greater Sudbury has cooled considerably.

“When we first moved back to Sudbury, it looked like the city was going to be booming for a while,” he said in August. “But that just didn't happen, and now I'm less optimistic that things are going to turn around here in the long run. It's really hard to build a house in Sudbury now for a reasonable amount of money.”

When combined with development charges and other fees builders must pay, along with frequent opposition at planning committee when developers try to get projects approved, the builder said profit margins have been squeezed to the point that he and his family are questioning whether they should move.

And figures from the Canada Mortgage and Housing Corporation paint a gloomy picture for the local home construction market. Results for August showed that the lone bright spot for local builders – apartment construction – has also been hit, with starts falling by almost half compared to the same period in 2013.

Housing starts in Greater Sudbury trended at 202 units in August compared to 161 in July, according to the CMHC. The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR). The standalone monthly SAAR was 270 units in August, down from 522 in July.

“The trend continued to move higher in August due to stable growth of single-detached starts,” said Jawad Ahmad, CMHC's market analyst for Sudbury, said in a release.

“However, year-to-date actual total starts have declined by 46 per cent compared to same period last year mainly due to slower apartment construction. In the last five years, 90 per cent of all apartment starts were purpose-built rental apartments.

“As of late, apartment starts have been slowing down due to factors such as large number of rental apartments still under construction (272 units), an increase in vacancy rate, slower growth in employment for the 15-24 year age group and a decline in in-migration, are taking the steam out of purpose-built rental apartment construction in Greater Sudbury.”

Construction of apartment buildings surged in recent years, after development charges on single-family homes soared in 2009, from about $3,000 per home to around $14,000.

Development charges are fees builders pay to offset the cost of added infrastructure their homes will require. The fees are considerably lower for multi-unit buildings, making them more economical to build.

Local builders say the charges force them to pay for more infrastructure than their developments cost the city. When other fees are included – such as road and sidewalk improvements the city will require for larger developments – they say homes are being priced beyond the reach of local consumers.

In June, city council agreed to delay an increase in the charges for two years in an attempt to help struggling local builders.

However, that has left a $2.6 million gap in the city budget, which the next city council will have to address.