The Reality of Regulation: How Political Interference in Building Codes is Making Housing Unaffordable

This blog was provided by Intracorp 

The home building industry is facing a myriad of challenges; from increasing municipal fees to a hesitant investment market. These issues are getting lots of attention, and for good reason. But the issue of an increasingly stringent building code is being overlooked by comparison. Below we set out to calculate the true cost of building to current code. The outcome is that overregulation in the housing sector has created a cost-of-delivery crisis and something has to give.  

In order to determine the impact of building codes on the cost of housing, we removed the cost of land, community amenity contributions, development cost charges and fees (DCCs) as well as any profit from a sample condominium building proforma.

With construction costs soaring to $562.59 per square foot, homeownership is more unaffordable than ever. Even before factoring in profit margins, land acquisition, and DCCs, a buyer would need a gross annual income of at least $140,710 to afford a modest two-bedroom condominium (see Appendix A). Once those additional costs are included, the required income climbs to over $200,000. For perspective, the average gross household income in Canada is $106,300[i] —a stark gap that highlights the growing affordability crisis.

Below is a comparison of the same project and pro forma using construction pricing from fifteen years ago, with the same exclusions and assumptions as above.

Fifteen years ago, construction costs were only $204.19 per square foot – less than half of what they are today. At that time, the gross annual income required to purchase a two-bedroom condominium (excluding profit, land costs, and DCCs) would have been approximately $83,396. With the average Canadian household earning $79,102, homeownership was far more attainable for the average family than it is today.[ii]

This doubling in construction costs cannot be attributed to inflation. CPI was at 120.9 in 2011 and is at 161.3 today.[iii] That’s an annualized change of only 2.18%. For context, if we assumed that CPI inflation caused 100% of that price increase, that would represent 7.92% per year, more than triple the actual CPI rate. So, what is really driving this dramatic escalation in costs?

The original intent of a building code was to establish minimum standards for the design, construction, and maintenance of buildings to ensure safety, health, and structural integrity. However, building codes have evolved to reflect political agendas and as such, they have transformed into attempts to establish global leading standards. They now encompass Step Code energy targets, up to 100% adaptable unit requirements, air conditioning requirements, and seismic requirements, to only name a few.

The pace of regulatory change is rapid. CHBA has reported that there are 374 proposed code changes for National Model Construction Codes for 2025, and 186 out of 1200 standard references are being updated this year.[iv] Remarkably, there is no requirement for cost-benefit analysis when updating these standards—meaning their impact on housing affordability is neither assessed nor understood. Local governments double down on these through municipal codes, which pushes construction costs even higher.

The rising cost of meeting building code requirements is driven by a combination of factors—including the adoption of advanced technologies, higher-priced materials, and increasingly complex regulatory standards. Striking a balance between delivering housing that remains affordable and absorbing the cost of these requirements is becoming more difficult. Today, even baseline code compliance often demands the latest—and most expensive—technologies. While these upgrades may improve performance, they also push home prices beyond the reach of many buyers, undermining overall housing affordability.

The economic landscape further complicates this balance. Inflation and supply chain disruptions add layers of financial strain. The homebuilding industry is in a precarious position, striving to meet building code without passing excessive costs onto homeowners. This delicate balancing act requires innovative solutions and strategic planning to ensure that sustainable housing remains accessible and affordable.

Stakeholders, including policymakers, developers, and community leaders, need to collaborate to find viable pathways that support both sustainability and housing affordability. We need to prioritize with the understanding that if the economics do not work, housing does not get built. Building codes should prioritize life safety and outline minimum standards, not serve as an extension of political manifestos and best-in-class building innovation.

As mentioned, there’s considerable focus on Development Cost Charges (DCCs), which have risen at an annualized rate of 13% over the past 15 years, far outpacing inflation. While this is a key issue, bringing building code standards back to minimum requirements would have a more significant impact than eliminating DCCs, given the cost magnitude of each. This would allow developers to build the number of homes needed across the country. For homes built above minimum standards, incentives such as density bonuses or government grants should be introduced to help offset the extra costs, ensuring that these do not get passed on to homeowners and residents. This would allow Canadian’s the freedom of choice, as well as a home they can afford.

Appendix A:

Appendix B:

[i] CMHC – Canada – Household Income – Average and Median

[ii] CMHC – Canada – Household Income – Average and Median

[iii] Consumer Price Index, monthly, not seasonally adjusted (statcan.gc.ca)

[iv] Building Excellence – Winter 2024 by NextHome – Issuu