Why Are New Homes So Expensive? It’s More Than Just the Developers
In Ontario’s housing market, soaring prices have left many asking a pressing question: why are new homes so expensive? Popular opinion often blames developers, painting them as profit-driven entities hoarding wealth. However, a deeper dive into the realities of the housing industry reveals a far more complex story.
A recent report, Survive 2025: Perspectives on a Sector on the Edge by consulting firm StrategyCorp, sheds light on the challenges faced by Ontario’s homebuilders. From excessive bureaucracy to skyrocketing costs, the hurdles are significant, and their impact is undeniable.
The Role of Developers: More Than Meets the Eye
Breaking the Stereotype
Developers are often perceived as wealthy and unsympathetic. However, StrategyCorp’s findings tell a different story. Many developers view themselves as community builders, striving to meet the critical demand for housing but feeling unsupported by government policies.
“They feel like they’ve been tasked with a socially important goal and are not being given the tools or resources to achieve it,” explained Aidan Grove-White, a principal at StrategyCorp.
A Crisis of Supply
Private developers are responsible for 90% of Ontario’s new homes, yet face significant barriers, including red tape and costly delays. For instance, obtaining approvals for a subdivision can take nearly a decade. Each year of unmet housing targets exacerbates the existing shortage, pushing the dream of homeownership further out of reach.
The True Cost Drivers
Development Charges: A Hidden Tax on Millennials
One of the most controversial factors inflating home prices is the reliance on development charges (DCs). Municipalities charge developers upfront for infrastructure like water mains and sewers—costs that are inevitably passed on to buyers.
This “growth pays for growth” model, while logical in principle, disproportionately affects new home buyers. As one developer noted, it acts as an “intergenerational wealth transfer from Millennials to Boomers.” Unlike previous generations, today’s buyers shoulder these extra costs, which can add tens of thousands of dollars to a home’s price tag.
Red Tape and Bureaucratic Delays
The approval process for new projects is another significant hurdle. A high-rise building, for example, can take years to gain approval. Developers face continuous rounds of revisions, which not only delay construction but also increase costs.
Specialized Projects Burdening Buyers
Some municipal charges fund projects that don’t directly benefit new homeowners. In Ottawa, for example, development charges help pay for borrowing costs on existing infrastructure like the Confederation Line LRT and proposed facilities like an Olympic-sized pool.
Such practices raise questions about fairness. Why should new buyers bear the costs of amenities that serve the entire community?
The Call for Change
Government’s Role in Alleviating the Crisis
Developers aren’t the only players in the housing market, but their ability to deliver new homes hinges on government support. The Survive 2025 report calls for greater empathy and partnership between policymakers and the development industry.
Ottawa’s ambitious target of 151,000 new homes over the next decade seems unattainable under current conditions. If municipal, provincial, and federal governments don’t address red tape and funding inefficiencies, the housing deficit will continue to grow.
Fairness and Collaboration
Shifting some infrastructure costs to general municipal budgets rather than concentrating them on new buyers could relieve pressure. Additionally, streamlining approval processes and reducing unnecessary bureaucratic obstacles could accelerate construction timelines and lower costs.
Practical Takeaways
For policymakers, industry leaders, and residents alike, the report offers several lessons:
- Understand the Bigger Picture: Developers are not the sole cause of high housing prices. A combination of systemic issues, from government policies to market dynamics, contributes to the crisis.
- Advocate for Fair Policies: Residents and advocacy groups can push for reforms in development charges and approval processes to ensure fairer distribution of costs.
- Encourage Collaboration: Governments and developers must work together as partners, not adversaries, to address Ontario’s housing needs effectively.
Conclusion: Building a Path Forward
Ontario’s housing crisis is a generational challenge, requiring urgent and collaborative solutions. Developers are not the enemy but essential players in addressing the shortage. By fostering empathy, streamlining processes, and rethinking funding mechanisms, policymakers and industry leaders can create a more equitable housing landscape.
If you’re passionate about solving the housing crisis or want to stay informed, consider engaging with local housing advocacy groups or attending public forums to share your perspective. Together, we can work toward a more affordable and inclusive future.
