2 days ago
Canada must double home construction over 10 years for affordability: CMHC
Canada's housing agency says home construction in the country will need to double within the next 10 years if affordability levels are to reach what was last seen in 2019.
The Canada Mortgage and Housing Corp. (CMHC) said up to 4.8 million new homes will need to be built by 2035, with its latest supply gaps estimate report showing between 430,000 and 480,000 housing units are needed annually — far more than projections by the CMHC of 245,000 starts each year.
'Tackling this housing affordability challenge is enormous, it's absolutely critical to increase housing supply,' said Aled ab Iorwerth, CMHC deputy chief economist.
Ab Iorwerth said, during a podcast published by the agency, that doubling the pace of construction was achievable but it would require a 'significantly larger and modernized workforce,' as well as more investment from the private sector, fewer delays and less regulation.
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Earlier this week, the CMHC said housing starts in May edged down 0.2 per cent compared to April, with 279,510 units.
The report, released Thursday, stated that restoring affordability levels that were last seen in 2004 was 'no longer realistic.'
That goal was laid out in 2023, when the agency estimated Canada would need to build an added 3.5 million housing units by 2030, in addition to the 2.3 million projected to be built by that year.
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But the post-COVID-19 surge in housing costs 'changed Canada's affordability landscape,' and challenges being seen in places like Toronto and Vancouver — already ongoing for decades — would take more time to tackle.
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The report includes reassurances that increasing the housing supply is unlikely to cause financial instability as 'these forces take time to produce reactions.' Ab Iowerth added the projections in the report were calculated on a 10-year timeline for that reason.
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But Ab Iowerth noted if supply is not added, prices will only get worse.
'We have predictions that, without increasing supply, house prices will continue to become more and more affordable,' he said.
'There's that challenge, but there's equally a challenge in the rental system. Rents will continue to rise because of the absence of supply, so if we don't tackle this problem, it will become a bigger and bigger problem that starts to pile up and become worse.'
Housing construction was a key issue during the federal election campaign earlier this year, with the Liberals promising to double the rate of residential construction over the next decade to reach 500,000 homes per year.
The plan emphasized scaling up prefabricated housing construction. It said a new entity called Build Canada Homes would provide $25 billion in debt financing and $1 billion in equity financing to prefabricated homebuilders to reduce construction times by up to 50 per cent.
The CMHC report shows a return to 2019 affordability levels in the next decade would lead to house prices being roughly one-quarter lower than they would be in 2035 as it currently stands, with average rents down by an average of five per cent.
Without changes, however, Ab Iowerth warns the issues facing Canadians is unlikely to shift.
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'The average person looking to rent or buy a house right now is facing a big challenge: not only is it costly, but even finding a place is hard,' he said.
'We need more housing supply so that people can move to Vancouver and find the work they want or move to Toronto and get the job they want and, in the process, help the Canadian economy.'
—with files from The Canadian Press
