Canada is facing a formidable challenge in its real estate sector with a stark need for approximately 3.5 million additional housing units by 2030, according to a recent report prepared by the Canada Mortgage and Housing Corp. (CMHC). The report, however, suggests that the enormity of the task may render the achievement of this goal unlikely, regardless of current construction efforts.
The report follows an earlier examination of housing shortages and affordability, carried out by the CMHC in June 2022. According to the updated data, the affordability benchmark remains based on the 2004 levels, representing the share of after-tax income an average household would need to purchase an average home.
Aled ab Iorwerth, the Deputy Chief Economist of CMHC, reiterated on The Vassy Kapelos Show that there is a pressing urgency to respond to the gap in housing supply. However, the question in focus has shifted more towards the acceleration of the supply increase rather than the quantum of increase.
The uneven distribution of the supply gap across provinces continues to be a concern. In provinces such as Ontario, slower growth in household income is expected to result in reduced housing demand. Alberta and Quebec, on the other hand, are projected to witness a surge in demand.
Despite the daunting figure of 3.5 million units, Iorwerth does not deem the task impossible but certainly difficult and challenging. A collective effort from policymakers, the business sector, and a spurt of innovative solutions are vital to address housing affordability issues in the long term.
On the same wavelength, Sean Fraser, the Housing Minister, declared that he has every intention of resolving Canada’s national housing crisis and restoring affordability.
The CMHC report suggests that while immigration into Canada is significantly higher than anticipated, the rise in the number of households required to maintain affordability by 2030 will not be substantially higher compared to previous projections.
Demand for housing burgeons due to various factors, including immigration, rising incomes, and reduced interest rates. The supply, however, has not maintained pace with this escalating demand.
Prime Minister Justin Trudeau recently fast-tracked housing construction by initiating a $74 million deal with London, Ontario. The plan aims to expedite the completion of over 2,000 housing units over the next three years, with the federal Housing Accelerator Fund. This will include accommodations ranging from high-density developments to smaller apartment buildings.
The Housing Accelerator Fund, a $4 billion initiative, is designed to stimulate the creation of 100,000 new housing units. This will be facilitated through a collaboration with municipalities to update zoning and permit systems and accelerate residential construction.
Trudeau acknowledged that home prices have inflated due to a housing shortage in large cities worldwide. But the Prime Minister expressed his determination to avoid mirroring the real estate trends of cities like New York, Paris, London, or San Francisco.