By Susan Pigg

Business Reporter

There are growing concerns that Ontario’s push to curb urban sprawl and intensify development has taken off with unexpected vigour.

Condo development is in overdrive in the downtown core while construction of new single-family homes in the regions has “run out of gas” — down 57 per cent in the last decade, veteran housing experts are quietly warning.

Land prices are skyrocketing as developers, keen to cash in on the biggest condo boom in the world, are engaging in “extremely competitive” bidding for the dwindling number of prime development sites left along subway lines.

At the same time, a “perfect storm” of high development surcharges by municipalities and a shortage of develop-ready land in the outlying regions has seen housing starts decline so dramatically, they now lag far behind demand.

The numbers are so confusing and worrisome, most of the discussion about what to do — if anything — is just going on behind the scenes at this point, although some will feature prominently Thursday at the Canadian Mortgage and Housing Corporation’s annual Toronto Housing Outlook Conference.

“Maybe we need to rethink what high density means,” says George Carras, a well-respected watcher of the housing market.

“I wouldn’t say the (province’s intensification) policy hasn’t worked. But there may have some unintended consequences.”

The biggest one, developers and housing experts fear, is that housing is already becoming unaffordable and will become completely out of reach when interest rates start rising.

Despite all the construction cranes on the Toronto horizon and suburban homes still springing up in the outlying regions, the total supply of new housing in the GTA — from condos to detached homes — is down about 32 per cent now over a decade ago, says Carras.

There are just 4,000 so-called develop-ready sites for single-family homes left in the GTA now, down from about 12,000 in 2007, he notes. And most of those are in far-flung areas of Durham such as Clarington, too far for most to commute.

The effects are now being felt from two provincial policies introduced five years ago — the greenbelt policy which set strict limits on how far the GTA could sprawl and the Places to Grow policy which encouraged higher density development.

What no one anticipated at the time was that the global financial meltdown would send investors scurrying to safe havens like Canada, looking for the keys to hard assets like real estate.

That, and the “urbanization trend” that’s taking hold right across the country — young professionals, in particular, wanting to live close to work — has sent demand for high-rise soaring, says John O’Bryan, vice chairman of commercial real estate company CB Richard Ellis.

A decade ago, some 35,000 homes — detached, semi-detached and townhouses — were being built across the GTA, says Carras. That’s now down to 15,000 a year.

While high-rise has risen from an average of just 12,000 to about 20,000, that increase of 8,000 units doesn’t begin to make up for the shortfall of new homes, especially given immigration which is seeing about 100,000 new people a year migrate to the GTA, says Carras.

The Building Industry and Land Development Assoc. (BILD) has warned that “regulatory inertia” is also contributing to housing shortages and escalating land and housing prices. Municipalities in the GTA have asked that some 10,500 hectares of so-called “whitebelt” lands — lots between the existing cities and the greenbelt — be freed up for development.

But provincial approvals and Ontario Municipal Board reviews have slowed the process and it could be two more years before major parcels are released, says Joe Vaccaro, acting president of BILD.

Right now the “active inventory” of low-rise housing in the GTA stands at just 6,000, says Carras, a record low from historic levels of about 24,000.

Already the region is at risk of an affordability crisis that will only worsen if supply doesn’t pick up and interest rates do, notes economist Will Dunning in a recently released report Restricted Land Supply and Rising Housing Costs in the GTA, done for the Residential Construction Council of Ontario.

House prices have risen 78 per cent in the GTA from 2000 to 2010 — on average 5.9 per cent per year, well above the 2.1 per cent inflation and 2.7 per cent wage increases during the same period.