Home Builders Face Major Challenges


Usually when 20 people are asked their opinions about something, there is a great deal of disagreement and debate.

But when 20 Calgary-and-area home builders and land developers were asked late last year how they thought 2013 would unfold, there was 100% agreement: Steady as she goes, with modest increases in sales and new home starts.

Bill Bobyk, vice-president of the Sterling Group, pretty much sums it up.

"We are projecting moderate growth in the market as well," says Bobyk. "I think the market will be up 5% to 10% in overall new home starts for 2013."

Bobyk’s expectation of 5% to 10% growth is in line with the majority of those polled, but it isn’t going to be smooth sailing by any stretch.

There are challenges, such as labour shortages and cost increases, to deal with this year.

"One of the biggest challenges facing our industry as a whole in 2013 is affordability," says Dave Gladney, president and CEO of Morrison Homes. "Home prices are rising for a few reasons, material increases (and) a tight labour market. With Calgary having an unemployment rate of 4.2% our industry is facing a tight labor market. And there is going to be a shortage of serviced land, which will add pressure to lot pricing."

And there it is — a shortage of serviced lots. That is without a doubt the biggest challenge of all for builders and developers this year.

The city — actually city council — spent most of 2012 dithering about area structure plan approvals, while trying to figure out the exact definitions of future growth as laid out in the Municipal Development Plan (MDP).

Throw in personal opinions and agendas from councillors and the end result is a shortage of land that will have severe consequences for the industry and home buyers.

It’s all about supply and demand — high demand in the face of low supply means rising costs, not just for buyers but also for builders and developers.

Also at issue is the Growth Management Framework (GMF) put together by the city which, through a set of criteria, basically picks ‘winner’ and ‘loser’ area structure plan applications.

A developer spending millions of dollars on land acquisition and planning only to be told the application doesn’t meet the criteria (over which the developer has no input), would likely stop developing in the city and leave or just shut down the business altogether.

"This puts land in fewer hands, that causes decreased competition, thereby reducing customer choice and eroding affordability," says Deep Shergill, president and owner of Prominent Homes.

Point the finger at the MDP and the GMF for adding to the red tape at City Hall — red tape that was apparently going to go away, but like other promises, hasn’t happened.

Talk about something else everyone can agree on: The sooner the red tape actually goes away, the better for builders, developers and buyers.

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Alicia Colquhoun

Alicia Colquhoun

CENTURY 21 Bamber Realty Ltd.
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