Canada’s National Housing Agency reports that strides are being made to address housing affordability. Yet the Canadian housing market needs nearly 3.5 million additional units by the decade’s end.
This requirement exceeds existing projects, signaling ongoing efforts to bridge the Canadian housing market affordability gap. The Canada Mortgage and Housing Corporation released an updated report on Wednesday, highlighting the primary finding.
This report revisited their June 2022 assessment, emphasizing the critical update.
The Canada Mortgage and Housing Corp. (CMHC) asserts the necessity of constructing additional homes by 2030 to achieve more affordability goals.
The agency published a report on Thursday outlining the requirement for a fresh strategy amid growing demand and affordability worries in the Canadian housing market.
This report underscores the need for a reimagined approach to effectively address the housing supply shortage. The report highlights the challenge of expanding supply, stressing the substantial time needed for construction and government approvals.
Increasing supply is complex, given the time-consuming construction. Also, the government approval processes. So, they are requiring prompt action for affordability by 2030.
If the current pace of new construction persists, CMHC anticipates a growth of 2.3 million units in Canada’s housing stock by 2030. That is nearing a total of 19 million units.
CMHC determined that approximately 5.8 million new units would be required to meet supply needs. However, this calculation revealed a significant shortfall in the number of new housing units needed for adequate supply by 2030.
CMHC Deputy Chief Economist Aled ab Iorwerth noted current supply problems, labor shortages, and rising financing costs as immediate challenges.
Aled ab Iorwerth stressed that the latest report underscores the urgency of boosting the housing supply for universal affordability in the Canadian housing market. He noted the report’s ongoing efforts to enhance comprehension of factors influencing housing demand and supply.
The agency emphasizes that achieving affordability requires surpassing existing construction rates. Challenges such as a slowing housing market and construction labor shortages may hinder reaching over 22 million housing units in Canada by 2030.
BMO economist R. Kavcic is Skeptical about the Goals
Last year, during the assessment, BMO economist Robert Kavcic expressed skepticism about CMHC’s goals, citing several challenges.
Kavcic mentioned the construction industry’s historically low unemployment rate, record-high vacancies, a shortage of skilled trades, and rising building material costs.
He emphasized that achieving CMHC’s objective of doubling construction rates within the next decade would be exceedingly challenging.
Kavcic suggested that such a feat might only be possible under conditions of significant economic downturn or substantial inflationary pressures.
Ontario has the highest deficit
In Wednesday’s update, the agency reported modest advancements, somewhat reducing the gap, but the Canadian housing market still requires additional units beyond current plans.
The CMHC notes from the assessment that while housing supply has improved somewhat in Ontario, it has deteriorated in other provinces such as Quebec, Alberta, and British Columbia.
Ontario continues to account for most of the deficit, with a gap of 1.48 million units, a decrease from last year’s projection of 1.85 million. Quebec’s demand stands at approximately 860,000 units, reflecting an increase of 240,000 compared to the previous year.
British Columbia requires 610,000 units, marking a rise of 50,000, while Alberta’s demand has grown to 130,000, a notable increase from the 20,000 projected last year.
The objective is the 2004 affordability standard in the Canadian housing market
The agency’s objective is rooted in the 2004 affordability standard, a period marked by lower housing expenses and economic stability. Canada Housing Market is considered affordable by CMHC when it comprises approximately 30% of income, with the exception of Ontario (37%) and BC (44%).
Economist Robert Hogue from the Royal Bank of Canada acknowledges the ongoing housing affordability crisis but concurs that incremental supply-side improvements are occurring.
He supports the notion that gradual progress is being observed in addressing the housing supply situation. In an interview with CBC News, he noted that there has been some advancement in housing construction, but it falls short of meeting the needs of newcomers to Canada.