A report to the Metro Vancouver Housing Corporation (MVHC) notes “unprecendented” increases in construction costs since 2020.
While costs in B.C. have seen a “steady” escalation of about 2.4 percent to 2.8 percent a year in previous years, the report says numbers have skyrocketed by around 15 percent per year since January 2020.
This has implications not only on the price of newly constructed homes for private ownership.
It also means that it’s going to cost more to develop new rental housing.
Thousands of residents in Metro Vancouver depend on the MVHC for affordable rental housing.
The regional entity provides housing in 49 rental complexes around the region.
The MVHC meets Friday (May 27), and included in its agenda is the report written by Metro Vancouver regional housing staff members Laurel Cowan and Jason Hingley.
“Construction costs have seen unprecedented increases over the past two years, a trend that is significantly impacting the development of new housing and in particular, affordable rental housing,” Cowan and Hingley stated.
A host of factors has driven up costs, and one of these is COVID-19.
“The COVID pandemic had major global and local impacts including supply chain issues, material shortages, and labour shortages, which led to increases in both material costs and labour,” the report stated.
Fuel costs have also contributed to the spike, as fuel prices “increased dramatically” by 25 percent to 30 percent in the Lower Mainland over the past two years.
Rising interest rates will only worsen the situation.
“Starting in Spring of 2022, interest rates have also begun to rise significantly, with additional increases expected to come,” Cowan and Hingley noted.
“This limits the construction industry’s ability to borrow cash and is anticipated to impact project costs moving forward.”
The report stated that these “challenges increase uncertainty and financial risk for housing’s capital program”.
The report recalled that the Metro Vancouver regional government has committed $100 million to “support new development and redevelopment” as part of its 10-year housing plan.
The plan “seeks to leverage federal and provincial funding support to deliver more projects and at deeper levels of affordability”.
“However,” the report noted, “unprecedented rates of construction cost escalation are significantly increasing the cost of development.”