Can we build 5 million homes in 7 years?
In its latest report, Canada’s Housing Supply Shortages, the Canada Mortgage and Housing Corporation (CMHC) maintained its 2022 projection that Canada needs nearly 3.5 million additional housing units – on top of the 1.66 million units already planned – to close the housing affordability gap by 2030.
CMHC defines affordability as the conditions that prevailed in 2003 and 2004, where an average household would devote close to 40% of their disposable income to buy an average house in Ontario, or 45% in BC.
This updated set of projections is consistent with CMHC’s 2022 report, with some adjustments due to economic growth, population gains and interest rates. Most notably, the projections show a sharp deceleration in population growth and assume that the recent spike in population growth is pulling forward future population growth.
CMHC’s projected supply shortfall is enormous and highlights the challenges faced by both renters and homeowners. Filling this gap would require completing roughly 430,000 net new additional units per year above the normal pace of construction. Consider that in 2022, housing completions came in at 220,000 units, with a 10-year average of 197,000 units. Restoring housing affordability by 2030 would require nearly triple the typical completion rate.
The Housing Supply Gap
One can debate the definition of affordability and the economic and demographic assumptions, but in the end, we have a housing supply crisis and no clear path to resolving affordability. It is unreasonable to expect that housing construction will triple, particularly if we plan to rely on multifamily construction, which has long completion timelines.
We have seen some movement at the local, provincial, and federal levels to tackle the supply issue. Over the coming months, we will review these plans and look at what other steps can be taken to address the housing supply crisis.
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