Ontario housing minister Paul Calandra expressed confidence that the Bank of Canada’s interest rate cut on Wednesday will help spur housing development as the province struggles to realize its goal of constructing 1.5 million homes by 2031.
Calandra told reporters he was “very relieved” interest rates had finally been cut after the country’s central bank shaved 0.25 per cent off its interest rate.
Many in the building and development industry have cited high interest rates as an issue slowing the construction of new homes in Ontario. Developers have struggled to get good value loans to build and prospective buyers have balked at mortgage rates.
Calandra said he felt that lower interest rates would “absolutely get some back in” who had held off building while rates were at the higher rate of five per cent.
“When the interest rates stopped climbing, there was some optimism,” he said.
Ontario Premier Doug Ford, who has lamented high interest rates, said he was confident the small cut would spur homebuilding across the province.
“I believe that when you lower the interest rate, homes will pop up like mushrooms all over the place,” he told reporters.
Calandra said that, while he didn’t want to “overstate” the effect of the relatively minor drop in the rate, it was an important moment for homebuyers and buildings in Ontario.
“This is a relief for a lot of people, helps get more shovels in the ground and helps people to get in the market,” he said. “I think you will start to see people moving forward almost immediately.”
The province is in the process of trying to build 1.5 million new homes by 2031, a target that requires a 10-year average of 150,000 new homes annually. In 2023, Ontario saw just 109,000 new homes come online.
To help hit its goal, the province has started counting basement units, garden suites and long-term care beds as new homes. It also plans to include student housing and retirement homes in its statistics.
Former housing minister Steve Clark said previously that the 1.5 million home goal was, to an extent, “out of my control” citing interest rates and other market conditions.
“Inflation in our country is at a point where I can only control things that are in my purview,” Clark said in April 2023. “I want to ensure that everything that I can do at the provincial level and with our municipal partners is in place so when the economy takes that upturn that we can get shovels in the ground.”
On Wednesday, the Bank of Canada’s interest rate cut brought its benchmark rate to 4.75 per cent.
Bank of Canada governor Tiff Macklem said in prepared remarks Wednesday that the “considerable progress” made in taming inflation should be “welcome news” to Canadians.
“We’ve come a long way in the fight against inflation,” he said.
Macklem said that if inflation continues to ease, “it is reasonable to expect further cuts to our policy interest rate.” But he added that the central bank would take its decisions “one meeting at a time.”
Calandra welcomed the suggestion rates would continue to drop and said it could be a key catalyst.
“It seems that the trend will be to lower rates,” he said. “I think this will help unleash a lot of activity that has been waiting on the sidelines.”
— with files from Global News’ Craig Lord
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