Government Dependency - Recent CMA Building Permit Composition in Canada

Ultimately all economics is local.  Ontario municipalities are in the final throes of a municipal election race and in my own community the question of municipal economic development via public sector construction spending has come up.  The concern is that much of the economic activity in my community over the last four years has been the result of taxpayer funded building projects given that traditional private sector activity in the transportation and resource sector has dried up.  One of my incumbent councilors wrote in to “set the record straight” by presenting some local building permit composition numbers.  Of course my curiosity was piqued to see what the composition of building permits is like in Canada and particularly how CMAs compare when it comes to institutional and government investment spending activity.

Building permits are one way to measure investment activity and are reported by
Statistics Canada by category: residential, industrial, commercial and institutional/governmental.  For Canada in 2013, approximately 60 percent of the value of building permits was residential, 7 percent was industrial, 23 percent was commercial and the remainder of 10 percent was institutional/governmental – that is to say largely public sector.  If monthly data is examined, these shares can fluctuate quite a bit over time but on an annual basis, these shares have remained pretty stable over time once a trend line is fitted – as Figure 1 shows.  There has been a small decline in the percentage of industrial permits and a small increase in commercial ones.

What is more interesting is what the institutional and governmental share of building permits is across the major Canadian CMAs.  My local councilor will probably not be happy with the numbers. Figure 2 presents the average percent share of total building permit values accounted for by the institutional and governmental sector for the period 2010 to 2014 ranked by CMA.  There is quite a range here. 

The national average is 10.6 percent. Across these 32 CMAs, the figures range from a high of Thunder Bay at 28.9 percent to a low of Calgary at 6.1 percent. Of the top ten, nine are from Ontario.  Indeed, the list of the top ten reads like a list of industrially depressed smaller Ontario cities.  It would appear that institutional and public sector construction projects have become the dominant form of new investment in many Ontario cities.  More institutional construction could possibly be a sign of an aging population if it is driven by long-term care home construction.  But it also can be yet another sign of Ontario’s weaker private sector economic performance.  When it comes to new investment activity, some communities seem heavily dependent on government life support.

Comments

[Kathleen]

Interesting numbers for Calgary and Edmonton. With the increase in population one would expect a build out of schools, hospitals, libraries. Are those types of buildings included as "institutional"?

[Livio Di Matteo]

Kathleen:
I believe schools, hospitals and the like would fall under institutional/governmental.

[Neil]

Kathleen: you'd expect schools and hospitals, but they're few and far between, particularly the schools. Schools here are overcrowded and falling apart. Some of the hospitals, too, but at least there's a few shiny new ones to balance the ones that are falling apart.

Alberta suffers from gross incompetence in the provincial government level, and is pretty much just catching up with all the things that didn't get built in the Klein era (since balancing the budget was much more important), let alone all the things that our most recent boom has made necessary.

[carsjam]

Livio -
I used to work with these classifications, and you are right to say that schools and such are government/institutional.
It's important to note that the permits data do not cover roads, transmission lines and other networks, nor do they cover dams, bridges, mines, seaports and other engineering works. These non-building assets are a significant part of overall fixed capital investment, or capex.
cj