Along-term, sustainable mega project. That’s how the Altus Group’s 2013 industry report describes residential construction in Newfoundland and Labrador. Completed for the Canadian Home Builders’ Association of Newfoundland and Labrador (CHBA-NL), the report compares economic indicators from 2006 to 2012.
Victoria Belbin, Chief Executive Officer for CHBANL, has reviewed the findings. She says they show the industry grew by 130 per cent over that period, “but the report shows that the impact of residential construction on the health of the province’s economy goes far beyond direct indicators.”
In 2012 there were 3,885 housing starts, up 75 per cent from 2006. Investment in residential construction and renovations exceeded $1.8 billion. New home construction accounted for $888 million of that. The indirect and induced economic impact included $4.78 billion in economic activity related to residential home construction and renovations. “That is equal to the total anticipated value of all oil and gas investment activities in Newfoundland and Labrador,” Belbin says.
The Altus Report found that residential construction created more than 21,212 fulltime- equivalent jobs last year in construction, material and service and other industries. “The industry paid $1.08 billion in wages, that’s oneut of every 10 dollars paid in salary and wages in the province,” explains Belbin. Residential construction also added $2.05 billion net to the gross domestic product.
Companies driving residential construction realized a profit of $980 million. Government’s cut was $585 million in tax revenues including $148 million in government-imposed fees on new housing.
“Policy makers seem to think that the current health of the residential construction industry makes this an opportune time for further taxation,” says Steve Porter. He is the newest president of the CHBA-NL and president of Porteco Renovations based in Conception Bay South, 20 kilometres west of St. John’s. “We discuss this problem around our board table at every meeting and have 100 per cent agreement.” Porter explains that the professionalism and expertise members can bring to the table would help ensure that “any new policies related to development would support the construction of affordable, energy efficient homes.”
In line with that logic, he says CHBANL is actively pursuing ways to work in partnership with the municipalities. The response from the other side of the table has so far been less than warm. “Instead of consulting with the CHBA-NL in the early stages of policy development, municipalities often just keep adding on taxes for new home construction,” he says. “What they don’t seem to realize is that the developer is not the person paying that tax. It is passed on to the home buyer. So, in the end, it is the policy makers who are chipping away at the affordability of homes.”
As a recent example, Porter points to significant increases in development fees enacted by the City of St. John’s on November 1, 2013. “They went up across the board and some fees increased by as much as 600 per cent,” he reveals. “And there are other tax increases being considered as we speak.”
“As the Altus study showed, the amount of activity that the new home sector represents is equal to the benefits of a mega project every year. But we feel like both levels of government still fail to recognize the importance of this industry as part of the economic engine,” says Porter. “Community growth shouldn’t be a burden on the newcomer.”
Victoria Belbin agrees. She points to the fact that government imposed charges and taxes on residential construction have increased dramatically since 2006. “The ever expanding list of new development fees are a concern for everyone,” she says.
“In the past, the cost for the installation of public services, such as water and sewer, were shared by all the tax payers.” The developer is now paying for the full cost of infrastructure in new developments, not the municipality. These costs are passed on to the consumers who move into that new neighbourhood. “These costs are in addition to the municipal fees and levies and taxes on each new home. And that makes housing less affordable,” she says. “If industry is to build the homes and the neighbourhoods that home buyers want, then the time to consult with the residential construction industry is now, while we have time to adapt to the changing market.”
“One of the biggest topics at the boardroom table is what part we can play in housing affordability,” Porter says. “But it seems a lot of times our hands are tied.” As an example, he says that that more often than not, when a developer proposes an affordable housing project they are stymied by inf lexible regulations and zoning. “Say, I propose an apartment complex to a town or a denser urban subdivision, then, instead of finding ways to partner with us and make it work, municipalities don’t make it easy.”
For both Belbin and Porter, the strength of the partnership with municipalities hinges on the ability of the residential construction industry to “remain profitable even though the return on investment in housing can go up or down.” Success demands a careful balance of risk, return, investment, and profit. “That balance can be undone by ill-considered policy,” Porter says.
While they are concerned about the impact of government policy on the affordability of homes, the CHBA-NL is also concerned with the individual experience of home owners. Building a custom home or renovating can be a costly and stressful experience if it is not managed properly. Belbin says homeowners should not confuse the temptation to hire cash-only contractors with protecting themselves. “When these f ly-by-nighters come in, there is no guarantee of worker skills or compliance with building codes,” she says. There are no permits, inspections, licenses or certificates. “If a worker is injured while working on your home, or if there is damage to a neighbouring property, you are liable. And because you have no contract you have no legal recourse,” she says. “One accident could cost you everything.”
But you can protect yourself and control costs at the same time, says Belbin. “Anyone who does the due diligence will quickly discover that by hiring a contractor who is a member of CHBA-NL they can be assured of skilled work by trained professionals.” That assurance includes a contract with warranties on skilled work and quality materials in writing, plus all necessary permits, inspections, licenses and certificates. “It also provides you with protection from liability for workers’ injuries and property damage.”
As president, Steve Porter has his eye on the big picture but he understands as a developer that communities are built one home, one relationship, at a time. “We adhere to a strict code of ethics at all times. Our objectives are to increase the credibility and the expertise of home builders. Our work and our warranties have home owners covered. That is our main strategy for building quality, affordable homes,” he says. Whether you are renovating an existing home, or building a new home, Belbin recommends hiring a CHBA-NL member. For renovations, look for a member who has registered as a RenoMark renovator. For new homes, look for builders who have earned Master Builder certification. To qualify for either of these – the nationally recognized RenoMark program or the provincial Master Builder program – the member companies must meet rigorous professional standards. Belbin explains that by following the project management steps laid out in the Get It In Writing brochure on their website, and by hiring a member of CHBA-NL, “you have done your due diligence and taken the right steps to ensure the quality and contain the cost of your project.”
Since it was founded in 1956, the CHBANL has attracted a broad cross section of industry-related professionals. The list of past and present leaders is a who’s who in the residential construction industry. •
Photo provided by Cardinal Homes Limited, taken from their current subdivision under construction. For more information visit: www.cardinalhomes.ca