Q&A With Bob Finnigan: Canadian Home Builders' Association's New Leader

Industry vet Bob Finnigan is now at the helm of the Canadian Home Builders' Association following stints as head of both the Ontario organization and BILD. We spoke with Finnigan, also Herity Group COO, about what’s on his agenda.

Finnigan is a director of the Mikey Network, a charity formed in 2003 that's placed 2,170 public-access MIKEYs (portable defibrillators named in honour of his late business partner Mike Salem) in high-risk locations nationwide, helping save 35 lives to date.

Bisnow: What’s your key area of focus as CHBA president?  

Bob Finnigan: Affordability is the big one. In Ontario we’re going to get as many as 300,000 immigrants a year, and they’ve got to live somewhere. And they’ve been choosing Toronto and Vancouver primarily. Everyone’s talking about foreign investors, but the reality is most of them are new Canadians. They’re not speculators, they’re 300,000 people who need a house, like you or me. And that fuels our housing market. For a city like Toronto, it means we need 50,000 new homes each year, and we just don’t have that kind of supply. 

That filters down to the provincial level, in terms of land supply and economics, and we need the feds and the province to work together to understand that dynamic. You can’t artificially restrict land use. We have no problem with the greenbelt or white belt as designated. But when people say the building industry is not using the land, holding on to it, not releasing it — no, we can’t access it because it’s not serviced. So that’s where we’re at: if there are four homes available and five people looking for them, the price goes up; it’s the law of supply and demand. And we’ve got a lot of people looking for very few homes right now. 

Bisnow: You’ve said before that overly aggressive energy-efficiency standards in the building code are pushing prices up.

Finnigan: Ontario Environment Minister Glen Murray wants to make all new homes net zero now. But with every building code change, the bucks add up — there are 600 changes coming in 2017, and that adds up to a few thousand dollars. And those added costs end up being transferred to the buyer. Our point is a home built today is 40% more energy efficient than one built in 1990, and 50% more efficient than one built in 1985. So we need to take it easy on new home standards.

The fact is that 99% of the homes are standing; we only add 1% to the housing stock a year, and 75% of the homes standing right now were built before 1990. Those are the guys to go after. You get a four-time dollar return for every dollar spent on older homes. Net zero homes are great, with unbelievable insulation, fabulous HVAC systems and greywater recycling. But to build that house today will cost you $60k more. And again, the extra cost gets passed down to buyers, creating affordability issues.

Also, affordability of houses will take a hit if we don’t have people to build them. There’s a trades shortage. Because high-rise construction volume is so substantial, most trades are going into high-rise. It’s a nicer work environment: it’s usually enclosed, and there’s little mud and rain. But we’ll need 125,000 new workers in the next decade, and if we don’t get them, the guys who can build houses will be able to name their price, and it’ll also slow everything down. There’s this stigma that working with your hands is not a good thing, but these guys are laughing all the way to the bank. We need more of them, and these are high-paying skilled jobs. But a teen today might say, "No way."

Bisnow: How did you get involved in the development industry?

Finnigan: Alan Heron and I went to school together. I knew his dad was a builder, and Hugh is as gregarious now as he was the day I met him. As teenagers, Alan and I worked for Heron Homes, taking straw out of basements. When you pour a foundation in winter, to stop the bottom from freezing you cover it in straw, but you have to take it out before spring, because if wet straw gets trapped it’ll stink as it rots. We would make $200 for a weekend’s work — a ton of money then. I finished university in 1982, and couldn’t find a job amid the recession, so I worked in service at Heron, fixing broken windows and floors. I could do anything, a jack-of-all-trades. I learned the business inside and out. 

In 1984, as the recession eased, I went to work for Dominion (now Metro), and then Sobeys, doing commercial real estate analysis and feasibility studies. I’m a geography major; I studied industrial and commercial locational analysis. This is what I still do today for Herity Group: feasibility studies. When I worked for Dominion and Sobeys, my job was to go out and look at sites, and run numbers for my bosses. I knew what we could afford in rent and I’d look at sales potential for a given market or area in a city. Sobeys is looking at building a nice new supermarket, 10[k SF] to 15k SF. Can we do X million dollars in sales; how much rent can we afford? My job was putting together those reports.

In 1988, at the height of the market, Alan and I joined his dad’s company and started a housebuilding division, Herigan, and we did that for a few years till the next economic cliff came in 1990, and Herigan got absorbed into Heron Homes. Things were slow, then it picked up again in 1994. And then I became a partner, and Alan went off to run his own home division. That same year Heron Homes joined forces with our current partners in Heathwood (Daniels Financial, run by the sons of Jack Daniels). Since then we’ve done thousands of homes together. We also established the Mikey Network and Two Men and a Truck, our moving franchise division, with 27 franchises in Canada.

Bisnow: What are some of the challenges the homebuilding industry faces?

Finnigan: Both the housing industry and municipalities need to come to terms with the concept of non-traditional single-family homes. We’ve done stacked townhouses and some mid-rise projects in the past, and that will become the norm for us moving forward. We want to accommodate new urbanism. But each stacked townhouse or mid-rise project comes with its own struggles and fights with the municipality (over density targets and concerns about overcrowding). We’re caught up in the high-rise versus low-rise battle, as opposed to looking at what can we do better in low-rise to give us a higher density but still provide us with the kind of homes that people want. The reality is that many people still want ground-oriented housing. But it doesn’t have to be the traditional 50-foot lot. They just don’t want to be 30 storeys up in a tower. 

But longer project approval timelines are taking a toll, especially when it comes to affordability. Back in 1992, a builder like us would buy a piece of greenfield land, develop and service it, then make the case with the local government to bring it into the urban boundary. It would typically take about a year for that to happen, then another year and a half to get a subdivision application in and go to sale. So two and a half years in all, and then you’d sell 60 to 100 homes a year if you’re lucky. But when the growth plan and greenbelt were introduced in the mid 2000s, it changed everything.

Case in point: in 2004 we bought a 100-acre farm in Whitby, and we were lucky the land was just outside the greenbelt. But the growth plan meant we could no longer ask to bring the site into the urban boundary — the town must do it. Meanwhile towns were being told they had to re-do their official plans to be in line with new density targets, and they had three years to do it, but that got extended. So for land we bought in 2004, we finally submitted our application in 2011, and it took four years to go through the approval process. Everything was new to municipalities in terms of densities and what was required to hit targets.

The project was approved in 2015, and we launched sales in 2016 (with Andrin Homes as JV partner), selling 500 homes in four and a half weeks. The prices were way higher than they would’ve been. When money sits there a dozen years, there’s huge opportunity cost. It took over a decade to bring on something as simple as a subdivision. So the new regulations are befuddling everybody. But the good news is that all three housing associations (CHBA, OHBA and BILD) are talking regularly and we’re all on the same page. And it’s coast to coast. In Regina they have same issues we have in Toronto: density, re-zoning timing, development charges and affordability. We’ll keep lobbying for a better deal.