New Home Construction in Kelowna Has Effectively Ground to a Halt — Here's Why It Matters
A Crisis Hiding in Plain Sight
If you've been watching the Kelowna real estate market and wondering why housing costs remain so stubbornly high even as sales have slowed, the answer has a lot to do with something happening well before homes ever hit the market — new construction.
According to the Kelowna branch of the Canadian Home Builders' Association, new home construction in our city has effectively ground to a halt. The data is stark: roughly 30% of the cost of any new home built in Kelowna today — whether it's a condo, a townhouse, or a detached single-family home — is made up of government taxes, fees, and levies. Municipal, provincial, and federal governments all take a piece before a homeowner ever turns a key in the front door.
Cassidy deVeer, executive officer of the Kelowna branch of the Canadian Home Builders' Association, put it bluntly, comparing the way governments tax housing to how they tax alcohol or tobacco. The comparison stings — and for good reason. When you pile that level of cost onto an already challenging affordability environment, the result is predictable: developers stop breaking ground.
What's Driving Up the Cost of New Homes in Kelowna
The biggest ticket items include the federal GST, which adds 5% to the cost of all new housing, and the City of Kelowna's development cost charges (DCCs) — fees levied on new development to help fund the infrastructure those new homes will need. Water lines, sewer connections, roads, and parks all cost money to build, and municipalities have increasingly passed those costs on to new home buyers through DCCs.
The problem, as the home builders' association sees it, is that these charges have grown so significant that they've crossed a line. Rather than just recovering costs fairly, they've become a barrier to new supply. And with new supply effectively frozen, the housing inventory that buyers need to push prices down in any meaningful way simply isn't materializing.
The association is calling for the federal government to eliminate GST on all new housing, and for the City of Kelowna to significantly reduce its development cost charges. DeVeer acknowledges that some fees are necessary — you can't have new neighbourhoods without streets and utilities — but argues the current level is strangling the market.
Why This Affects Every Buyer and Seller in the Okanagan
You might be wondering why a story about home builders and government fees matters to you as a buyer, seller, or current homeowner in the Kelowna area. The connection is direct.
When new supply dries up, existing inventory becomes more precious. That means homes that are for sale face less competition from new builds, which keeps prices from coming down as much as you might expect given the current slowdown in sales activity. It's one of the reasons the Kelowna housing market has felt so stubbornly expensive even as transaction volumes have fallen significantly from the 2021 peak.
For buyers, it means the affordability challenge isn't going away without policy intervention. The current environment of higher mortgage costs combined with restricted new supply creates a genuine squeeze that won't resolve itself quickly or automatically.
For sellers, particularly those with established, well-located properties, the constrained supply picture is actually a form of protection against dramatic price erosion. Your home isn't competing against a flood of shiny new builds the way it might in a healthier construction environment.
Understanding these supply-side dynamics is something I pay close attention to when advising clients in Kelowna, West Kelowna, Lake Country, and Peachland. The macro picture shapes local neighbourhood-level decisions more than most people realize, and it's why staying informed on construction trends matters whether you're buying, selling, or simply planning for the future.
What Needs to Change — and What to Watch For
The home builders' association is pushing hard for policy reform at both the municipal and federal levels. There's growing recognition provincially and nationally that housing affordability is a genuine crisis, and that supply-side intervention — not just demand-side management — is essential to fixing it.
Watch for movement on development cost charges at the next City of Kelowna council sessions. There's been increasing pressure on municipalities across BC to look hard at DCCs as part of their housing strategies. Any meaningful reduction could unlock a new wave of project approvals that are currently sitting on ice.
At the federal level, a GST exemption or rebate expansion on new housing is a perennial discussion. Some changes have been made in recent years, but industry advocates argue those measures haven't gone far enough to move the needle where it counts — in markets like Kelowna where affordability is already stretched.
Until those changes materialize, expect new construction in Kelowna to remain suppressed, existing inventory to stay tight, and the affordability tension that has defined this market for the past several years to continue.
Have questions about what this means for your home or investment? Contact us:
Mark Coons, BBA, CE
REALTOR® | eXp Realty Kelowna
Team Lead, Selling Okanagan Group
Relocated to Kelowna in 2018
📞 778-946-6454
📩 [email protected]
