Canada needs to build more homes faster if the country is going to get a handle on its housing affordability crisis in the coming decade, says a new report from Canada Mortgage and Housing Corp. (CMHC).
It shows the problem of undersupply is particularly acute in Ontario, where a provincial task force earlier this year recommended the province needs 1.5 million more homes by 2030.
According to CMHC, it could take as many as 1.85 million homes to bring affordability back to a level where 40 per cent of the average household’s disposable income would pay for an average priced home.
CMHC says nationwide, Canada is tracking to build 2.3 million more homes by 2030 if construction continues at the current rate. But we need 3.5 million more than that to restore affordability to the level of the economically stable period of 2003 and 2004.
Back then, it cost the average Ontario household about 40 per cent of its disposable income for an average priced home. Last year, that same average household needed 59 per cent of its disposable income to shelter in a home that cost $871,000, the Ontario average.
By building the additional 3.5 million homes, it could bring the cost of the average housing unit back to between $499,000 and $551,000 — putting it within 37 to 40 per cent of the disposable income of the average household.
“The average price is of the stock of housing so it’s not necessarily the resale price of the individual home. It represents the average house on the market. If we get more housing supply we’re hoping that supply would be more middle market, maybe more spacious apartments, maybe more housing targeted at middle-income Canadians. That new supply should be coming on at a lower price point than is currently in the market,” said CMHC deputy chief economist Aled ab Iorwerth.
The bulk of the supply gap is in the most expensive housing markets in Ontario and BC, but Montreal also needs to boost its supply to reel in climbing prices, said the report released Thursday.
“Ensuring affordability means that housing supply will have to match growth and economic demand for housing, which may come from changes in incomes and interest rates,” said ab Iorwerth.
It’s clear the scope of the problem is too great for the federal government to tackle alone, he told reporters. Other levels of government and private sector will have to be part of the solution, and innovation in redeveloping retail and industrial spaces as well as existing single-family homes into more affordable multi-family units would also play a role in boosting housing development, he said.
“Developers must become more productive and make full use of land holdings to build more housing, while governments must make regulatory systems faster and more efficient,” said the report.
But ab Iorwerth acknowledged current economic conditions aren’t conducive to hastening construction.
“There are supply chain issues, there are labor shortages at the moment, the cost of financing is going up. Clearly there are short-term challenges. What we’re trying to say is, ‘This is our target for 2030 and we need everybody to work together to try to get to this target, including the private sector,’” he said.
“What we’re really concentrating on is the 2030 target, not the cyclical challenges that we’re facing in the short-term.”
Toronto NDP MPP Jessica Bell said the CMHC report shows Ontario has clearly fallen behind in meeting the needs of current and future housing demand.
“To make affordable housing again we need to build more homes and we need to build more affordable homes,” she said.
Premier Doug Ford needs to do things differently in his second term of government to solve the housing affordability crisis, said Bell.
“That means not just building new homes but also building more affordable homes.”
She said the NDP will continue calling for a new agency to build and finance new affordable homes and for an end to exclusionary zoning that keeps multi-family homes out of single-family neighborhoods in cities such as Toronto. Ontario also needs to encourage the construction of more purpose-built rentals, especially larger, family-sized units.
“We are seeing a heavy focus on small condo units. The average size in Ontario is 650 square feet. That’s too small for the vast majority of Ontarians who are looking for a home to live in,” said Bell.
JOIN THE CONVERSATION
Anyone can read Conversations, but to contribute, you should be a registered Torstar account holder. If you do not yet have a Torstar account, you can create one now (it is free)