Magnitude of housing supply problem surprising, says CMHC

Affordable housing starts in three of the country's largest provinces are set to miss targets

Magnitude of housing supply problem surprising, says CMHC

Affordable housing starts for Ontario, British Columbia and Quebec will fail to meet 2030 targets, Canada’s national housing agency has said, in a stark indication of the inventory challenges gripping some of the country’s largest provinces.

Canada Mortgage and Housing Corporation (CMHC) revealed in its latest Housing Market Insight that even under best-case scenarios, those provinces and Alberta will only have enough labour capacity during the next eight years to boost the number of housing starts by between 30% and 50%.

The corporation has set a target of 3.5 million homes over and above existing capacity by 2030 – but while it was always known that certain provinces would struggle to hit their goals more than others, the scale of the problem is concerning, according to Dana Senagama (pictured top), one of the report’s authors.

“We always knew that Ontario and BC were troubled spots in terms of supply, or lack of it. I think most surprising [about the report] was the magnitude of the problem that these provinces are going to have to face in order to meet not just our housing starts projections, but also our affordability goals,” Senagama told Canadian Mortgage Professional.

Ontario faces the steepest challenges where labour capacity is concerned and is the only province of the four which has more projected households than expected housing starts during the next eight years. That province, Quebec and BC would all have to at least double the number of starts they’re able to produce under best-case scenarios – and a tight labour market means that’s a distant prospect.

While the COVID-19 pandemic presented some hurdles, it also showed that the construction industry was able to get more done with a smaller workforce, Senagama said. “There were fewer workers, but they had a lot of projects that needed to be completed,” she explained.

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“You don’t want to pay the penalties of delaying projects, so it was kind of breakneck speed, get things done, completed and ready for occupancy. But once things revert back to normal levels, particularly with a lot of the supply chain delays, etc., that seems to be more of the norm, things are going to get even worse, not any better.”

There is still some chance of increasing labour capacity – namely, through targeted immigration focused at bringing in workers that are qualified and able to do residential construction. Still, the length of time it takes to complete building projects remains a key sticking point in the country’s supply shortage, according to Senagama.

“Nothing really works at the pace that we would want. Things take a lot longer in reality – essentially here we are trying to increase supply quite quickly, and the entire building process is very long-winded,” she said. “Building our way out of this problem is not going to be the solution, because the construction cycle just on its own takes very long.”

Indeed, CMHC recently calculated that average low-rise projects in Toronto take about 10-15 years on average to be ready for occupancy – “so it’s not really the quick solution,” Senagama said.

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Critics of the slow pace of construction in major markets have pointed to red tape and overt bureaucracy as two of the chief culprits behind that malaise. Senagama said CMHC’s Housing Accelerator Fund, which provides funding to remove regulatory delays across many municipalities, should help in that regard, while the corporation has also introduced a Rapid Housing Initiative as a pillar of its national housing strategy, targeted at identifying and addressing solutions to the housing supply shortage throughout many of Canada’s urban centres.

Still, other challenges remain – and it’s incumbent on the private sector, as well as governments at federal, provincial and municipal level, to continue working together to eke out new and innovative solutions to the crisis, Senagama said.

“There needs to be an assessment as to where the bottlenecks are… but also, we have to understand the reality of building in new subdivisions,” she said. “You can’t just lay down sewers or pipelines overnight. It’s not a quick solution – 2030 is only eight years away.

“Can we really bring that much supply on at this speed? We need to be more creative and have more avenues to explore and be more innovative in terms of how we provide housing.”