Canada Mortgage and Housing Corp.’s new estimates on Canada’s housing supply show that a return to 2019 housing affordability levels is possible – but getting there will require a major homebuilding overhaul.
According to CMHC, between 430,000 and 480,000 new housing units will need to be built annually over the next decade to restore affordability. This is an approximate doubling of the current pace of home construction in Canada.
“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,” said Aled ab Iorwerth, deputy chief economist for CMHC.
“It will also require significant innovation in construction technology and growth in labour productivity.”
In a recent report, TD Bank said 400,000 new units per year may be enough to tackle the housing shortage. However, TD economist Rishi Sondhi warned that construction sector productivity and a retiring workforce are “structural challenges that will need to be overcome.”
Which regions have the biggest supply shortfalls?
By province, the most significant housing supply gaps are in Ontario and Nova Scotia, which saw some of the fastest rising housing costs due to the pandemic, and British Columbia, said CMHC.
“By estimating housing supply gaps across Canada, our goal is to ensure policymakers from all orders of government, as well as the private sector, understand the scale of the challenge,” said Aled ab Iorwerth. “Systemic changes are essential if we are to double the pace of homebuilding in Canada.”
Supply gaps by city
- According to estimates, Montréal faces the largest housing supply gap of the large Census Metropolitan Areas (CMAs). Current trends show “housing affordability challenges will become much more acute if housing supply is not significantly increased,” said CMHC.
- In Toronto, it’s estimated a 70-per-cent increase in homebuilding over the next decade would help to improve affordability issues. Despite increased rental construction in recent years, the region is lacking homeownership options that match local incomes.
- In Vancouver, it is estimated 7,000 additional homes are needed annually above the “business-as-usual” scenario, an increase of 29 per cent. In 2023, more than 33,000 housing starts were recorded in this area. “This continued level of construction would help the region’s longstanding affordability issues for both homeowners and renters,” reads the report.
- Calgary, which has seen record levels of home construction for three consecutive years, is estimated to need 45 per cent more new homes annually above today’s levels. “This would help counter post-pandemic affordability challenges for both the homeownership and rental markets,” reads the report.
- Ottawa-Gatineau is estimated to have the second-largest housing supply gap of Canada’s large CMAs. The region saw increased homebuilding from 2021 through 2023, but since the pandemic, new supply has not kept pace with increased housing demand.
- In Edmonton, no additional supply is required beyond what is currently projected, as sufficient market housing is expected to be built in the region to maintain affordability by 2035.
