The government of Ontario has revised its economic outlook and is now bracing for a drop in housing starts, sales, and prices next year.
Finance Minister Peter Bethlenfalvy tabled Ontario's 2022 fall economic statement on Monday, introducing downward revisions to projections made by the government in the previous 2022 budget, passed earlier this year.
Housing starts, previously expected to total 86,900 in 2022 are now projected to total a slightly smaller 86,600. The 2023 estimate, previously 84,000, has been downgraded to 76,900. Similar numbers are expected in 2024 with its previous projection of 87,300 housing starts now sitting at 77,800.
Home resales, which were already expected to drop this year by 11.3% are now looking at a 31.7% decline. In 2023, the previously projected 1.5% increase has been revised to a 14% decline. And as sales fall, so too will Ontario housing prices, with the province revising its 2.6% home resale price growth expectation for next year to an 8.1% drop.
These new expectations follow suit with Ontario’s GDP which is now expected to rise 2.6% in 2022, 0.5% in 2023, 1.6% in 2024, and 2.1% in 2025. With the exception of the 2025 forecast, all are reductions in expected GDP growth.
Deficit expectations appeared to cause a stir, as the Ontario government projected a shrinking, yet still substantial, $12.9-B deficit for the 2022/2023 fiscal year. This marks a more than $7B decline from the deficit predicted in the summer's budget, but is still in conflict with $100-M surplus forecasted by the Financial Accountability Office, an independent financial watchdog, and the $2.1-B surplus that Public Accounts reported at the end of the fiscal year in March 2022. Even in a best case, fast-growth scenario, the Ontario government predicts the province would see a $10.4-B deficit in 2022-23, a $900-M deficit in 2023-24, and a $9.2-B surplus in 2024-25.
"Premier Ford and Finance Minister Bethlenfalvy claim that a forecast budget deficit for next year justifies a Fall Economic Statement with no investments in the public services people rely on every day," said Green Party Leader Mike Schreiner in a statement. "But their austerity mindset is causing nothing but pain and hardship for the people of Ontario. And it goes against a recent report from the Financial Accountability Office, which forecast an economic outlook in stark contrast to the one the government presented today, with six years of surpluses leading to $44B in an unallocated ‘contingency fund.'"
Although Schreiner and others called for more public services support from the government, Bethlenfalvy did lay out plans for the introduction, continuation, and expansion of several government programs, saying that the Ontario government "has a responsible fiscal plan, which will help us navigate these uncertain times."
"We need to be flexible and forward thinking with a fiscal plan that is ready to support people and businesses when and if the time comes, while also laying a strong foundation for future generations," Bethlenfalvy said.
The proposed legislation included further encouraging the reduction of property tax for small businesses. As part of the 2020 Budget, municipalities were able to provide tax reductions up to 35% for eligible commercial and industrial properties -- a change that's already been adopted by Toronto and Ottawa. To encourage this more, the government announced it will "automatically provide matching tax reductions for small businesses within all other municipalities that adopt the subclass."
The statement also introduced legislation that would extend the current gas and fuel tax rate cuts to the end of next year. The tax cut, which dropped the gas tax by 5.7 cents per litre and the fuel tax by 5.3 cents per litre, is expected to save Ontario drivers, on average, $195 between July 1, 2022 and December 31, 2023.
Another change proposed in the legislation is the creation of a voluntary clean energy credit registry, a move that Bethlenfalvy says will "give businesses another tool to achieve their environmental and sustainable sustainability goals." A registry of clean energy credits -- certificates guaranteeing corporate energy consumers that the power used in their operations comes from clean generation sources -- is intended to highlight Ontario's clean electricity grid for businesses wishing to invest in the province.
Member of Provincial Parliament Stephanie Bowman (Don Valley West) said that although she agrees on the importance of attracting businesses to Ontario, the Ontario government's actions are not enough to meaningfully address the climate crisis -- a decision that she says could backfire economically.
"In this era of climate crisis, which this government continues to ignore, the government overlooked a very important criteria that companies use to make their decisions about location: access to green energy," Bowman said. "With their decision to cancel green energy contracts put in place by the previous Liberal government and their decision to add carbon-emitting gas plants to our energy grid, this government is jeopardizing Ontario's ability to attract companies to Ontario."
Schreiner similarly lamented the lack of climate action in the legislation, as well as the absence of new affordable housing measures.
"We are facing a severe affordability crisis, yet Ford has failed to offer anything today other than previously announced band-aids that do next to nothing to help people make ends meet," Schreiner said in a statement. "No new investments in affordable housing while more and more Ontarians face homelessness and a generation of young people wonder if they’ll ever be able to afford their own home."
The economic update also included changes to the Ontario Disability Support Program that would allow those on it to keep more of the money they earn by increasing the monthly earnings exemption from $200 to $1,000 per month. The Guaranteed Annual Income System payment for low-income seniors would be doubled in 2023 -- a maximum increase of nearly $1,000 per person. As well, an additional $40M would be invested in the latest round of funding in the Skills Development Fund -- a move heralded by the Residential Construction Council of Ontario (RESCON).
"With a massive skilled trades shortage looming, [RESCON] is pleased that the provincial government has committed in its fall economic statement to providing an additional $40M for the Skills Development Fund," the council said in a statement. "We cannot lose sight of the fact that up to a third of skilled trades in construction are nearing retirement and reports suggest that 100,000 skilled workers are needed to meet the government's commitment to build 1.5M more homes by 2031. The residential construction industry contributes more than $66B to Ontario’s economy so we need to ensure we have enough new people coming into the industry.