Housing Industry

The housing construction industry encompasses new and renovation residential construction. Housing is important from both a social and an economic perspective. From a social perspective, housing is the foundation for community development as it contributes directly to the health, social, and educational well being of people and communities. From an economic perspective, the construction and maintenance of housing creates businesses and jobs in a variety of sectors such as manufacturing, retail, construction, legal, and financial. Over the past 30 years, new residential construction activity has experienced wide fluctuations. New-home construction reached its highest level in Saskatchewan in the mid-1970s. From 1971 to 1988, new housing starts totaled 131,367 units; starts peaked in 1976, when more than 13,000 new homes were constructed in the province. A prime determinant of the demand for new housing is the underlying pattern of demographics and household growth. The housing boom in the 1970s is mainly attributed to the aging of the large number of “baby boomers” born during the 1940s and 1950s. In the period following 1988, lower fertility rates, reduced real income growth, volatile interest rates, and recessions reduced the demand for new housing units in the province.

New housing construction and land development are very conspicuous. However, the less noticeable renovation activity and expenditure generally exceeds new-home construction expenditures. Strength in the resale market, robust housing starts, and the effects of a strong job market typically drive renovation spending. Housing has a tremendous impact on the economy, and because of the multiplier effect of residential construction activity on the rest of the economy, there is a strong relationship between housing and employment. In addition to the direct employment generated in the actual design and building of the housing units, there is indirect Labour involved in the supply of goods to manufacturers of residential building products, and in the trading and Transportation of materials to the contractors and construction sites. Canada Mortgage and Housing Corporation (CMHC) estimates that for every $1 million spent directly on new housing construction, 5.4 person-years of direct employment are created and a further 18.2 person-years are indirectly created in other sectors of the economy.

The share of Gross Domestic Product (GDP) accounted for by residential construction expenditures is an indication of the direct contribution that residential construction makes to the economy. Since 1970, the share of total GDP accounted for by total residential construction expenditures in Saskatchewan has ranged between 1.7% and 6.6%, the highest shares being recorded in the years 1976 and 1977. In Saskatchewan, a large number of small- and medium-sized firms, and only a handful of large-sized firms, characterize the residential construction industry. In a 1993 study, the Saskatchewan Home Builders' Association (SHBA) estimated that there were more than 700 residential contractors in Saskatchewan. Based on the survey respondents, only 10% of residential contractors had six or more full-time employees. The existence of a large number of small firms reflects the fragmented nature of the residential construction industry as well as the ease of entry into the industry, since small firms may enter the industry when demand is buoyant, and withdraw when demand is slack.

Alicia McGregor

Further Reading