By Jock Finlayson, ICBA Chief Economist
Despite the B.C. NDP Government’s promises to ramp up housing supply, the latest building permit data tell a different story—planned residential construction is down sharply, with the first 11 months of 2024 down almost 10%, compared to same period in 2023. While industrial and commercial projects showed some resilience, they weren’t enough to counter the steep decline in homebuilding, leaving questions about whether policymakers can turn political pledges into real-world progress.
As of November 2024, the value of building permits issued year-to-date in British Columbia was 8.2% lower than during the same 11-month period in 2023. Planned construction spending – as measured by permit issuance – was higher in both the industrial and commercial segments, but this was more than offset by declines in the residential segment and weakness in the institutional/government buildings category. Permit values fell by 13.4% compared to November 2023. This follows a year-over-year gain of 25% in October, underscoring the volatile nature of the monthly building permit data.
Year-to-date, the number of planned residential units in B.C. slumped by 12.6% vs 2023 levels. Compared to the same month in 2023, the value of residential building permits was 30% lower in November. To say the least, these results do not inspire confidence that the B.C. government’s commitment to boost housing supply is bearing much fruit. Difficult financing conditions for builders and developers and complex, delay-prone regulatory and approval processes for residential projects are among the factors slowing development across B.C.
A Snapshot of Permits in the Last Decade
It is instructive to look back over a longer period to understand the patterns and shifts in building activity. This is particularly important in a jurisdiction like B.C., where construction looms large as an economic engine.
Figure 1 reports on the total value of permit issuance for the years 2014-2023. Overall, there were sizable increases in the value of building permits over the ten-year period. In part, this reflects B.C.’s strong population growth, ongoing work on a handful of energy-related mega-projects from 2016 onwards, and an upsurge in public sector capital spending by all levels of government.
Figure 1:
Figure 2 breaks down the aggregate permit data by showing the value of permits in the four segments tracked by Statistics Canada: residential, commercial, government/institutional, and industrial. Data are provided for every second year over the period, as well as 2023.
Figure 2:
The key takeaways from the data summarized in Figure 2 are as follows:
Residential: Permit issuance rose steeply from 2014 through 2018 but has exhibited no clear trend since then. Residential permit values jumped in 2021-22 following the COVID-induced drop in 2020, but they have moved lower since 2022 (stretching into 2024, which is not shown in the Figure). Juxtaposed against B.C.’s surging population, the pattern of residential building permits since 2018 reinforces concerns over the province’s housing supply and affordability crisis. It should be noted that the residential segment accounts for the largest share of total building activity in British Columbia – well over half of total permit values.
Commercial: The value of commercial building permits increased substantially from 2014 to 2019 before weakening in 2020-21 and then gaining some momentum over 2022-23. The commercial category captures buildings used in the trade and distribution of goods and services; it also includes office buildings. Economic and population growth are important drivers of building activity in this sector.
Government/Institutional: The value of permits in the government/institutional segment has generally risen – albeit in fits and starts – over the last decade. The B.C. government has dramatically ramped up capital spending over the last few years in areas that it controls (health, education, Crown corporations, and some parts of transportation). However, some of this spending growth reflects the impacts of inflation, escalating building costs, and cost over-runs on many public sector projects. B.C. taxpayers are getting far “less” per dollar of provincial public sector capital outlays than was the case ten years ago.
Industrial: in B.C., the industrial sector accounts for the smallest share of overall permit values (generally 4-6%). Permits trended higher from 2014 to 2019 and rebounded again over 2022-23 after a period of softness in 2020-21. The industrial category includes buildings used in the processing or production of goods as well as for related transportation and communications.
Conclusion
The recent weakness in building permit activity is one sign of a sluggish B.C. economy – an economy in which output (inflation-adjusted gross domestic product) has been lagging population growth, resulting in downward pressure on GDP per person. Residential building has failed to respond to governments’ efforts to accelerate homebuilding. This has broader macroeconomic implications because the residential segment is by far the biggest slice of the overall construction industry and accounts for a majority of building permits. There has been no clear trend in permit issuance in the other segments, with significant year-to-year volatility.
For B.C. policymakers, at least two lessons can be drawn from the building permit data reviewed in this blog. First, there is work to be done to translate the political aspiration to increase housing supply into more shovels in ground – and quickly. Second, the province needs to pay close attention to the competitive and cost-of-doing-business environment that influences commercial and industrial investment across the numerous sectors that make up our diverse economy.
