The alarm has been raised.
The Central Okanagan branch of the Canadian Home Builders' Association is distressed that 32% fewer building permits have been issued by the City of Kelowna the first seven months of this year, signaling an upcoming 40% plunge in residential construction..
"It's hard to be hopeful or optimistic when you see these numbers and this trend," said Daniel Winer, executive officer of the association.
"Builders and developers are being forced to pull back, exactly when we need to continue building to meet the demand for all kinds of housing, especially affordable housing."
The lack of housing creates even more competition for the homes that are already on the market, pushing up prices even higher.
Today, the association released the latest figures from the City of Kelowna' housing permit data.
For the first seven months of this year, January through July, 242 building permits for residential construction were issued, a plummet of 32% compared to the 358 permits issued over the same seven months last year.
The 242 permits will result in 1,379 homes of all kinds (single-family, apartments, condominiums, townhomes and suites in homes) being built, a 40% dive from the 2,253 homes that resulted from the 358 permits last year.
Developers want to build more housing of all types, but are stymied by the City of Kelowna's high development cost charges (as much as $50,000 per home), red tape, high cost of land, high cost of materials, inflation and higher interest rates.
"Kelowna has been underbuilding for at least two decades," said Jonathan Friesen, CEO of Mission Group, one of Kelowna's most prolific home builders (the Verve condos, Ella and Brooklyn highrises and upcoming Aqua highrises).
"The whole system is bottlenecked. Development cost charges (paid to the city) are too high and there's not enough labour and resources."
Not all of this is under the city's control, but the city could lower development cost charges and zone more land residential so that land costs would come down, according to Winer.
In fact, the association is calling for a city housing affordability task force.
It asked a couple of months ago and hasn't heard anything back yet.
Smaller units more densely packed in existing neighbourhoods would also increase the amount of housing and increase affordability, but many people already living in these neighbourhoods don't want such development in their area.
"Decreasing construction means construction workers are being laid off and Kelowna will fall even farther behind," said Winer.
"This is like adding insult to injury."
It was just a couple of months ago that the Central Okanagan branch of the Canadian Home Builders' Association revealed that residential construction was the backbone of the local economy.
Residential construction became Kelowna's biggest economic engine in 2022 with an annual impact of more than $2.5 billion, surpassing high tech at $2.5 billion and tourism at $2.1 billion.
In addition, in 2022, residential construction paid out $1.4 billion directly in wages to 19,000 workers who spent their money on everything from mortgages, rents and groceries to transportation, insurance and recreation.
A 40% slowdown could take the annual economic impact to $1.5 billion and wages to $840 million.
Kelowna's housing crisis goes well beyond the fundamental supply-and-demand logic.
There's a housing shortage, so demand is high, yet construction is dropping off.
It doesn't make sense.
"Developers are pulling back for so many reasons," said Winer.
"The cost of land, material costs, the labour shortage, interest rates and (city) DDCs (development cost charges) make it very challenging for any builder to build anything in Kelowna, especially anything affordable."
Let's explain.
In the city's official community plan to 2040 there's a permanent growth boundary that prevents any new subdivisions in outlying areas in favour of infill development where infrastructure and services already exist.
Infill means highrises downtown, fourplexes and 6-storey condominium and apartment buildings in the core, carriage houses and suites in existing homes.
This all provides more housing, but not enough.
"We need more housing of all types -- infill as well as new subdivisions," said Winer.
"This is a municipal, provincial and federal problem. We all have to work together to find solutions."
