Home construction shortage: Is Canada in trouble?

Much to be done – but 'encouraging' range of options to ramp up homebuilding, says CMHC exec

Home construction shortage: Is Canada in trouble?

It’s no secret that the current pace of homebuilding in Canada continues to languish well below what’s expected, with the rate of housing starts remaining sluggish and the prospect of hitting construction targets for the decade appearing – at best – a distant one.

Still, a new report by the national housing agency suggests that there’s plenty of potential for a rapid acceleration in homebuilding, with one of its top executives telling Canadian Mortgage Professional an “encouraging” slate of options is on the table.

First, the bad news: Canada’s housing production of 240,267 units in 2023 was mired significantly below the potential 400,000-unit clip it could have hit, given a record-high number of workers (650,000) employed in construction last year.

While it’s an understatement to say there’s much to be done to ramp up that pace of building, Mathieu Laberge (pictured top), senior vice president, housing economics and insights at Canada Mortgage and Housing Corporation (CMHC) – which authored the new report – said there are plenty of ways to achieve that goal.

“There have never been more resources dedicated to residential construction in Canada, ever. And given the resources we have, the bottom line is we could build a lot more: not quite, but close to twice as much as we’re building right now, in the best scenario,” he said.

“And so you’re seeing some concerning findings – but I find it actually very encouraging in the sense that there’s much more we can do right now to respond to the housing crisis Canadians are facing.”

What are the main barriers to home construction in Canada?

Unsurprisingly, CMHC’s report identifies regulation and excessive red tape as key factors weighing against home construction across Canada, although Laberge noted recent provincial government proposals in Quebec, British Columbia, and Ontario as grounds for optimism.

He also said industry – employers and trade unions in the space – had a big part to play, firstly by ensuring it’s embracing and adopting new innovations in residential construction.

“The challenge we have in Canada is we know what innovation looks like. We know what to do to build more and faster, but there’s no adoption by industry,” he said. “There’s reluctance [to adopt] 3D printing, of doing more than multi-unit modular building or prefab building. There’s reluctance to do even midrise, wood-frame, residential units.

“So these are all the things that happen elsewhere in the world. There’s no reason why we don’t do it. The industry needs to adopt that and start doing it now so a couple of years down the road we see the fruit bearing of this.”

The highly fragmented nature of Canada’s residential construction industry has arguably proven an impediment to homebuilding, according to CMHC. Almost 69% of construction companies nationally employ fewer than five people – and only one company has more than 500 employees.

Consolidation could be a logical next step in bringing the residential construction industry to scale, Laberge said, potentially allowing the sector to build units at a faster clip and cheaper price.

“As you grow bigger you generate economies of scale, and each unit becomes less expensive,” he said. “And this saving could be passed on to Canadians and make housing more affordable. But it’s not happening, because this industry’s so fragmented.”

Now is the time to act on housing crisis, exec urges

The federal government has identified a goal of completing 3.87 million additional homes by 2031 to help restore affordability in the housing market – a tall order, judging by current construction levels.

However, Laberge remains bullish on the chances of making a significant dent in the current shortfall, although he stressed the urgency of taking swift and immediate action.

“What we show in the paper is that we can actually ramp up production very quickly so more Canadians have access to an affordable unit that meets their needs,” he said. “What we need to realize is that we need to start this right now so we can start responding to the crisis – whether it’s 2030, 2031 or beyond, I think that will be an evolving condition.

“But we need to start somewhere. A lot of people are talking about crisis – but it’s time now that we start acting to respond to that crisis and not just speak about it. And I think industry plays a very significant role in doing that.”

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