Canada’s current pace of homebuilding will see the country face a gap of 3.5 million units by 2030, falling well short of the bar for housing affordability, according to a new report.
The Canada Mortgage and Housing Corp. (CMHC) published its latest analysis on Canada’s housing stock challenges Thursday.
The agency projects that Canada will add an additional 2.1 million housing units between 2021 and 2030, hitting a total stock of 19 million homes nationally.
But that will be well short of enough units to make housing affordable for all Canadians, the CMHC said.
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It projects Canada will need well over 22 million units by that time to put affordable roofs over the heads of the growing population.
Canada’s construction industry would have to more-than double its expected pace of building over that timeframe.
“Canada’s approach to housing supply needs to be rethought,” the report states.
“The evidence has been mounting for many years that the housing supply system is broken in many parts of Canada.”
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The CMHC notes, however, that supply is only one factor affecting affordability, and ramping up the pace of building will not solve the problem on its own. Other inputs not accounted for in the report include government policies affecting demand and the longevity of work-from-home trends post-pandemic.
Two-thirds of the housing gap will be felt in Ontario and British Columbia, the report finds. Quebec is also mentioned as needing a bump in supply over the coming decade.
But if Ontario is able to deliver the 1.85 million extra units the CMHC is prescribing in its report over the next 7.5 years, the price of the average home would drop to $ 499,000 from 2021 figures of $ 871,000.
In BC, an additional 570,000 units beyond today’s trajectory could drop the average home price to $ 679,000 in 2030 compared to $ 929,000 as of last year.
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These forecasts do not necessarily predict that same drop-off in value for existing homes, but reflects a larger proportion of cheaper, multi-unit builds in the market.
CMHC also notes that its projection, which assesses affordability for the average income, falls short when considering housing affordability for low-income Canadians, and says future reports would look at improving access for these households.
“The average household in British Columbia just simply cannot afford average housing today. And that’s what we’re trying to fix, “said Aled ab Iorwerth, CMHC’s deputy chief economist, in an interview with Global News on Thursday.
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While the CMHC report focused on housing gaps by province, ab Iorwerth said that much of the stock will need to be concentrated in large urban centers such as the Greater Toronto Area and Metro Vancouver.
These cities, where housing is already out of reach for many, must take the affordability question seriously, lest they drive away desperately needed skilled talent.
“We need people to come into our large urban areas. Housing costs are preventing them from moving. So this is potentially putting quite a damper on the long term economic prospects for these cities, ”he said.
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The goal to add an extra 3.5 million homes to Canada’s housing supply on top of the 2.2 million already expected to be completed by 2030 is a “massive undertaking” according to Mike Moffatt, senior policy director of the Smart Prosperity Institute.
“I do not think we’ll be able to do this, just to put it bluntly,” he told Global News.
In addition to rising material prices, the construction industry is facing a labor crunch as a wave of retirements for metal sheet workers, brick layers and electricians are not being offset by enough new talent flowing into the industry, Moffatt points out.
“We’re having trouble keeping up with those waves of retirements, let alone expand the sector. So there’s all kinds of bottlenecks here that’s going to make this difficult, ”he said.
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“But what the CMHC is telling us is that we need to try and we need to take the shortage seriously or else an entire generation of Canadians is going to get priced out of their homes.”
The CMHC report also noted, however, that ramping up construction is not the only way to augment supply. With a growing proportion of elderly households in Canada, embracing multi-generational homes would also ease demand pressures.
Ab Iorwerth said cities need to embrace this kind of “innovation” that could see underdeveloped lots such as retail buildings repurposed for higher density housing.
Moffatt agrees. He told Global News from his single-family home in Ottawa that it would currently be illegal to tear down his house and build a duplex or triplex to accommodate multiple families, but municipal zoning needs to catch up to the need for this kind of intensification.
“We need to find a way to get more of these homes built in our preexisting cities with preexisting infrastructure,” he said.
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Just because these are lofty goals does not mean they’re impossible, Moffatt added. He pointed to the post-World-War-Two era, when Canada saw a flurry of homebuliding activity to house veterans returning from overseas, as a time when the country rose to such a daunting challenge.
While the CMHC analysis did not factor in any possible boost to construction activity driven by the federal state $ 400-million Housing Accelerator Fund announced in the 2022 budget in April, ab Iorwerth said Thursday he has “high hopes” for the program as a strong incentive to increase the pace of building in Canada.
If Canada is going to succeed in returning to housing affordability levels seen two decades ago, it will be an “all-hands-on-deck effort” that sees municipal, provincial and federal governments align on the need to hike supply.
“It’s everybody working together, the government, all orders of governments, the private sector, and really trying to get our act together on improving housing supply. It’s a large number. It’s going to be difficult, ”he said.
– with files from Global News’s Kyle Benning
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