According to a new report, the current rate of residential construction in Canada will see the country face a gap of 3.5 million units by 2030, well below the housing affordability mark.
Canada Mortgage and Housing Corporation (CMHC) released its latest analysis on Canada’s housing stock challenges on Thursday.
The agency projects that Canada will add an additional 2.1 million housing units between 2021 and 2030, reaching a total stock of 19 million homes nationwide.
But that will fall far short of enough units to make housing affordable for all Canadians, CMHC said.
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He predicts that Canada will need well over 22 million units by then to put affordable roofs over the heads of the growing population.
The Canadian construction industry is expected to more than double its expected rate of construction over this period.
“Canada’s approach to housing supply needs to be rethought,” the report says.
“Evidence has been accumulating for many years that the housing supply system is failing in many parts of Canada.
British Columbia and Ontario need the biggest boosts
CMHC notes, however, that supply is only one factor affecting affordability and that accelerating the pace of construction alone will not solve the problem. Other inputs not considered in the report include government policies affecting demand and the longevity of work-from-home trends post-pandemic.
According to the report, two-thirds of the housing deficit will be felt in Ontario and British Columbia. Quebec is also mentioned as needing an increase in supply over the next decade.
But if Ontario is able to deliver the additional 1.85 million units that CMHC calls for in its report over the next 7.5 years, the price of an average home would drop to $499,000 from 2021 figures of $871,000.
In British Columbia, an additional 570,000 units beyond the current trajectory could drop the average home price to $679,000 in 2030 from $929,000 last year.
These forecasts do not necessarily predict the same decline in value for existing homes, but reflect a greater proportion of cheaper multi-unit construction on the market.
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CMHC also notes that its projection, which assesses affordability for the middle income, is insufficient when it comes to addressing housing affordability for low-income Canadians, and indicates that future reports would seek to improve access for these households.
“The average British Columbia household simply cannot afford an average home today. And that’s what we’re trying to solve,” CMHC deputy chief economist Aled ab Iorwerth said in an interview with Global News on Thursday.
Although CMHC’s report focuses on housing shortages by province, Ab Iorwerth said much of the stock will need to be concentrated in major 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 issue of affordability seriously, lest they chase away the skilled talent they desperately need.
“We need people to come to our major urban areas. The cost of housing prevents them from moving. So that potentially puts a damper on the long-term economic prospects of those cities,” he said.
CMHC’s goal not achievable, expert says
The goal of adding an additional 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 director of Smart Prosperity Institute policies.
“I don’t think we’ll be able to do that, just to put it bluntly,” he told Global News.
In addition to rising material prices, the construction industry is facing labor shortages as a wave of retirements for sheet metal workers, bricklayers and electricians is not expected. not matched by enough new talent flooding into the industry, Moffatt points out.
“We are struggling to keep up with these waves of retirements, let alone the expansion of the sector. So there are all kinds of bottlenecks here that are going to make it difficult,” he said.
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“But what CMHC is telling us is that we have to try and we have to take the shortage seriously, or a whole generation of Canadians are going to have their homes sold.”
The CMHC report also noted, however, that ramping up construction isn’t the only way to increase supply. With a growing proportion of older households in Canada, the adoption of multi-generational homes would also alleviate demand pressures.
Ab Iorwerth said cities need to embrace this kind of “innovation” which could see underdeveloped lots such as commercial buildings reallocated to 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 home and build a duplex or triplex to accommodate multiple families, but municipal zoning needs to catch up with the need for that kind of intensification.
“We need to find a way to get more of these homes built in our pre-existing cities with pre-existing infrastructure,” he said.
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Just because they’re lofty goals doesn’t mean they’re impossible, Moffatt added. He pointed to the post-war era, when Canada experienced a flurry of home building activity to house veterans returning from overseas, as a time when the country faced a challenge as discouraging.
Although CMHC’s analysis did not take into account a possible increase in construction activity driven by the federal government’s $400 million Housing Acceleration Fund announced in Budget 2022 in April, ab Iorwerth said Thursday he had “high hopes” for the program as a strong incentive. to accelerate the pace of construction in Canada.
If Canada is successful in returning to the levels of housing affordability seen two decades ago, it will be an “all-out effort” that will see municipal, provincial and federal governments align on the need to increase housing affordability. offer.
“It’s everyone working together, government, all levels of government, the private sector, and really trying to come together to improve the housing supply. That’s a big number. It’s going to be difficult,” he said.
– with files from Kyle Benning of Global News
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