Ottawa housing market sees more supply but affordability gap persists
Rental units are being built at a pace not seen in decades, but experts say the new supply is not reaching those most in need.
OTTAWA — Rental housing construction in Ottawa is proceeding at its fastest pace in decades, but experts say the new supply is not reaching the households most squeezed by high costs.
"So lots of supply, but not at affordable rents," said Steve Pomeroy, an industry professor at the Canadian Housing Evidence Collaborative at McMaster University.
He said improvements in rent are being seen in the higher end of the market, not among lower-income residents.
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Mike Moffatt, founding director of the Missing Middle Initiative at the University of Ottawa, calls the building boom an "understated good news story," helped by government loan programs and GST breaks.
He said as those units come online, rents should "stay flat" or decline.
For years, the cost of renting and owning a home has been rising in Ottawa, though the latest data shows a shift in market trends.
The asking rent for a one-bedroom apartment topped $2,000 per month in the first quarter of last year and has since fallen to $1,900, though the average rent actually paid continued to grow.
Across the city, Canada Mortgage and Housing Corporation data shows average rent for row houses and apartment units is higher in the outskirts.
Changes to federal immigration policies have slowed the pace of construction across Canada, according to the national housing agency’s latest report, but the housing pipeline in Ottawa remains pumping.
At the same time, public housing remains under intense pressure.
Ottawa’s centralized waitlist for rent-geared-to-income assistance is at 16,398 households, with just over 700 households getting accommodation so far this year.
The average wait is still five to eight years.
In order to keep up with growing demand, the city predicts it will need more than 10,000 net new units over the next decade.
Housing experts say a rapid increase in immigration, including international students and temporary foreign workers, has strained the market.
"They can get on a plane this morning and arrive here tonight, but you can't put a house on a production line this morning and have it ready tonight," Pomeroy said.
For decades, the industry focused far more on building condos and single-family homes, exacerbating the issue.
At the same time, costs for builders grew.
Taxes and fees rose along with the price of land, Moffatt said.
"We've made lots of changes as both a city and a province on how we use land," he said. "Development land has gotten relatively scarce and that's driven the price up."
The COVID-19 pandemic also had a considerable impact on construction, including through supply chain issues, rising costs and labour disruptions.
Earlier this year, Ottawa overhauled the document that guides future development with new rules to allow four units of housing on any serviced residential lot.
Carolyn Whitzman, a senior housing researcher at the University of Toronto School of Cities, said this is a "big part" of what cities can do to encourage building.
"The more plexes and small-scale apartment buildings we can help support, we can approve, the more likely that we're going to end up with more housing that families can afford close to jobs and services," she said.
These rules also encourage larger developments near transit hubs.
Moffatt said harmonizing rules is especially important for infill developers, who can streamline the design process by reusing plans.
Developers have also pushed to streamline the approval process and paperwork.
"Like anything in life, time is money," said Moffatt, outlining the costs of holding land as developments wind their way through the process. "We are talking about significant money."
Reducing development charges, which the City of Ottawa has agreed to do with financial help from higher levels of government, is also a key part of the puzzle, according to Moffatt.
The fees are paid per unit to ensure infrastructure is there to support new homes.
"You throw all of that at a project and you might get affordability for starting professionals, like moderate-income affordability. You won't get a new build that is affordable to people on minimum wage," said Whitzman.
Home budgeting experts have long presented a goal that households should spend 30 per cent of their income on accommodations.
For more than 110,000 Ottawa households, roughly split between homeowners and renters, that goal is out of reach, according to Statistics Canada data from 2024.
The data also found roughly 6.8 per cent of households live in a home with a number of rooms unsuitable for the number of people who live there.
In most industries, a major boost of supply would bring down prices.
"You can't do that in housing," said Pomeroy. "The industry won’t screw itself by building below cost."
It is possible for municipalities to put a finger on the scales by requiring a certain proportion of affordable or family-size units in exchange for allowing a developer to build extra-high buildings near transit hubs, an idea called inclusionary zoning.
The concept lost favour with the Ford government, and housing experts are not fans either.
With files from CBC News