Construction worker shortage is a challenge for building new housing in BC | Daily Hive

Shortage of construction workers is a major challenge for building new housing in BC: CMHC

Construction progress on Landmark on Robson at 1400 Robson Street, Vancouver, as of August 7, 2022. (Kenneth Chan/Daily Hive)

Even if the provincial and municipal governments were to create policies that catalyze significantly more new housing in BC above targets to tackle housing affordability, the construction labour force required to build these homes is currently not available.

That is the finding of a new study by Canada Mortgage and Housing Corporation (CMHC), which states there is insufficient labour capacity to address significant housing supply gaps in Ontario and BC, and to a lesser extent in Quebec.

In all four major provinces, including Alberta, there is only enough labour capacity to increase the number of housing starts — the beginning of new construction work on a new home — by between 30% and 55% from CMHC’s baseline starts forecasts through 2030. It is estimated BC, Ontario, and Quebec would have to double the number of housing starts under the best-case scenarios to reach CMHC’s 2030 affordability supply target.

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“Even if the labour force operates under best-case scenarios, housing starts will fall well below the 2030 affordable targets in all major provinces except Alberta. Alberta will be able to achieve its affordable housing supply target by 2030 whereas Ontario, Quebec and BC will have to double the number of starts that they can produce under best-case scenarios,” reads the report, noting “labour capacity will be a big problem and it might make housing less affordable.”

“Under any scenario, capacity problems are most acute in Ontario, the province with the largest population and the highest price pressures. Quebec and BC will also not have the labour capacity to increase housing supply through housing starts but to a lesser extent than Ontario. This also suggests that improvements in labour supply and efficiency may be in reach, unlike in Ontario where the gaps are too large.”

The skilled labour shortage in BC, exacerbated by the pandemic, has led to increased competition amongst workers for projects, which correspondingly leads to upward pressure on labour costs, and contributes to inflation.

Within Metro Vancouver, in particular, residential projects are increasingly competing with a growing number of major infrastructure projects, including new SkyTrain extensions, major new hospitals, and other new public facilities.

Escalating construction costs are a factor for why a major developer recently indicated their proposal to build a 25-storey tower in downtown Vancouver has been converted from rental housing to condominiums, with the latter providing higher returns to cover costs.

In recent months, there have also been reports of some pre-sales being put on hold due in part to construction cost escalation.

“The pandemic showed some evidence that the industry can manage greater construction volumes with fewer workers. However, this may lead to construction backlogs, which will create delays and postpone supplying new units to the market,” states CMHC.

It is noted by CMHC that BC, compared to the other three major provinces, is more likely to see some housing starts offset by demolitions to make way for more newer units. Such redevelopments replacing existing structures, instead of infill or greenfield sites, could lead to fewer new homes than the number of starts that were predicted by CMHC.

“Even though it looks like there is enough housing being built in BC, this doesn’t consider homes that are being demolished or converted to other uses. So, this approach may underestimate the number of homes that are needed in BC,” reads the report.

In land-constrained Metro Vancouver, and especially within the city of Vancouver, it makes sense to build vertically for increased density, but such apartments tend to see more construction backlogs and take longer to complete across the country, according to CMHC. With that said, labour capacity appears to be higher for apartment construction.

Moreover, the number of workers per residential unit under construction has been dropping in recent years in BC, Ontario, and Quebec, which means each worker is doing more work. At the same time, the proportion of apartment starts has been climbing, which suggests a worker is more capable of working on multiple apartment units at the same time. But workers are less likely to optimally handle construction work on multiple single-detached homes at the same time given the logistical challenges of moving labour, materials, and equipment.

As an alternative to new-build construction, CMHC suggests one alternative could be to convert existing under-utilized structures, such as commercial properties.

This is already the case in Edmonton and Calgary, where local governments have been encouraging property owners to convert vacant office space in their downtowns into other uses such as residential. Edmonton’s downtown office vacancy rate is currently hovering at 19%, while Calgary’s downtown is at 31%, which translates into an astonishing office space vacancy of about 13.8 million sq ft in Alberta’s largest downtown. In contrast, downtown Vancouver has the lowest downtown office vacancy rate of Canada’s major urban centres, with a vacancy rate hovering at 7% — a real total of about 2.3 million sq ft.

But fundamentally, policies need to be put in place to increase the size of the pool of available skilled workers in construction.

CMHC suggests the provincial governments of BC, Ontario, and Quebec need to improve education and incentives to attract younger people to work in construction, and the federal government should have a more targeted immigration program that brings in foreign workers who are skilled and have the qualifications for housing construction.

Over the short term, increasing compensation for construction workers appears to be the solution to ensuring projects are built smoothly with fewer disruptions.

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