To make Canadian housing more affordable, this country is going to have to build more homes. A lot more. Many times more than we’ve ever built. And almost certainly more than we can build, at least over the next few years.
The Canada Mortgage and Housing Corporation last year estimated that, to get shelter prices back to reasonable levels, this country will need 5.8 million new dwellings by 2030. CIBC economist Benjamin Tal recently updated that projection and concluded that the shortfall is now more than one million homes higher.
Earlier this week, a group called the Task Force for Housing and Climate released a report on what municipalities, provinces and the feds should do about that. The panel is a group of experts and advocates from business, academia and politics: The co-chairs are former Edmonton mayor Don Iveson and former Conservative cabinet minister Lisa Raitt, and one of the driving intellects is economist Mike Moffatt.
Their recommendations are mostly smart, sensible and necessary; they’d be worth following even if we weren’t in the midst of a housing crisis. The panel wants to dismantle roadblocks that prevent the private sector from building more housing, particularly in existing neighbourhoods, where demand is highest.
The report is about slimming down or eliminating permitting processes that turn development applications in long, uncertain and expensive odysseys. It’s about reducing or scrapping taxes and development charges that raise the cost of building, and thus discourage it. It’s about paring back zoning that is designed to keep most neighbourhoods as exclusive preserves of the single-family home.
I’m a fan of the report, which is largely advocating for things that have become conventional wisdom among academics and theorists – but which would constitute a revolution in practice.
And that revolution is already starting. It runs from Toronto and Edmonton doing away with minimum parking requirements, which raise developer costs by forcing them to build a fixed number of parking spots per unit, to British Columbia requiring municipalities to allow multiunit homes on single family lots, and much higher density near transit stations.
I agree. But I’ve got some caveats and concerns.
The first has to do with political acceptability. In a democracy, voters don’t usually get the first word, but they always get the last word. Our political graveyards are filled with good ideas and the expired politicians who backed them.
The GST, which was introduced in 1991 and replaced a hidden tax that punished exporters, was good for the Canadian economy and the national interest – but voters at the time didn’t see it that way. Bye-bye Mulroney government.
Or consider the Trudeau government’s federal carbon tax. Making carbon-based fuels more expensive is an efficient way of nudging people into using less carbon, and rebating the consumer tax means that low-carbon households turn a profit while high-carbon families end up out of pocket. It’s a smart system. It may also have given birth to an unpopularity problem of GST-sized proportions.
Zoning restrictions that keep multitenant buildings out of neighbourhoods of single-family homes are not there because voters hate them. They are there because voters – or at least voters who already live in those areas, as opposed to voters who want to live there – tend to strongly support them. It may be bad policy, but it’s bad policy with political heft.
What’s more, if we lower or eliminate charges and taxes on new developments, then somebody else has to pick up the tab. Good economic incentives may come with challenging political consequences. I’m not the mayor who has to explain to voters that my plan to build apartments next to your house may also come with a tax increase.
And then there’s the issue of how much new housing construction is possible in the next few years – even if all the task force’s recommendations were already in effect.
Canada had 252,000 housing starts in 2023, and nearly 260,000 in 2021 and 2022. That is, by far, the highest level of construction since the mid-1970s. But to hit the CMHC target of 5.8 million new homes by 2030, Canada would need to roughly triple the pace of construction.
It is exceedingly difficult to imagine how that could possibly happen, at least not anytime soon. It would call for trillions (yes, trillions) of dollars in new investment, while tilting our already housing-heavy economy even more toward housing. The share of the Canadian labour force in construction is already at its highest level ever, at nearly 8 per cent of workers.
The answer to greater housing affordability starts with what the Task Force for Housing and Climate wants – more housing, in the right places – but it doesn’t end there.
Ramping up supply has to be paired with moderation of demand. We have to come at the problem from both ends. The pace of population increase, driven by temporary immigration, and which saw Canada add an unprecedented 1.2 million people between the fall of 2022 and the fall of 2023, has to be scaled back.
Otherwise, any plan to reduce housing costs by having supply catch up to demand will be swamped. That’s exactly what’s been happening.
Tony Keller