(PHOTO: © GUY / ADOBE STOCK)
Canada will need 430,000 to 480,000 new housing units to be built annually over the next decade to return housing affordability levels to 2019 figures, says Canada Mortgage and Housing Corporation (CMHC). This would be an approximate doubling of the current pace of home construction in Canada.
CMHC research on productivity suggests that Canada’s homebuilding industry currently has the potential capacity to build more than 400,000 new homes per year, but many of the country’s largest Census Metropolitan Areas (CMAs) are facing significant supply gaps.
Montreal faces the largest housing supply gap of the large CMAs in CMHC’s latest report, which indicates that housing affordability challenges will become much more acute in that city if housing supply is not significantly increased. Since the pandemic, and when compared to local incomes, homeownership costs in Montreal have risen faster than any of the large CMAs in Canada.
According to the report, the strong rental construction activity over recent years must be expanded and matched by a significant increase in new units intended for the homeownership market.
In Toronto, CMHC says a 70 per cent increase in homebuilding over the next decade would help improve affordability issues. Despite increased rental construction in recent years, the region is lacking homeownership options that match local incomes.
Vancouver needs an estimated 7,200 additional homes annually, above the “business-as-usual” scenario. This would be an increase of 29 per cent. In 2023, more than 33,000 housing starts were recorded in the CMA.
Calgary has been setting record levels for home construction over the past three years, but still needs 45 per cent more new homes annually to counter post-pandemic affordability challenges, for both the homeownership and rental markets.
Amongst Canada’s large CMAs, Ottawa-Gatineau is estimated to have the second largest housing supply gap, and while the region saw increased homebuilding from 2021 through 2023, new supply has not kept pace with increased housing demand since the pandemic.
One city where there is a sufficient pace of housing is Edmonton, where no additional supply is required beyond what is currently projected to maintain affordability in the region by 2035.
“Doubling the pace of housing construction in Canada is achievable, but not without a significantly larger and modernized workforce, more private investment, less regulation, fewer delays and lower development costs,” stated Aled ab Iorwerth, deputy chief economist at CMHC. “It will also require significant innovation in construction technology and growth in labour productivity.”
The housing corporation says the post-pandemic surge in housing costs changed Canada’s affordability landscape, explaining that a restoration to affordability levels last seen two decades ago is no longer realistic. Given the lengthy, multi-year process to build new housing, the corporation says solving the housing crisis will be a marathon, and not a sprint. Reflective of this perspective, CMHC will present supply gap estimates on a rolling 10-year horizon going forward to allow for easier comparison to the current pace of housing construction.
