In order for housing to be affordable in 2030, CMHC estimates 3.5 million more homes will need to be built.
In a report released Thursday, the agency explains the need for a different approach to the housing shortage at a time when demand is on the rise and affordability is on the horizon.
“Increasing supply will be a challenge. Increasing supply takes time as construction takes time and the process of gaining government approval also takes time,” the report states. As a result, we must act now to reach affordability by 2030.
CMHC estimates that the country’s housing stock will increase by 2.3 million units by 2030. The agency estimates that 3.5 million additional homes are needed to achieve affordability for all Canadians.
In a conference call, CMHC deputy chief economist Aled ab Iorwerth said, “There are supply challenges, labour shortages and rising financing costs at the moment.”
BMO economist Robert Kavcic says the CMHC’s goals will be hard to achieve.
“The jobless rate in construction is near a record low; job vacancies are at an all-time high, there is a shortage of skilled tradesmen, and the cost of building materials is already rising quickly,” he said. Accordingly, doubling the rate of new construction over the next decade will be extremely difficult in the absence of significant inflationary pressure unless the economy rolls over.
In the first quarter of 2022, there were 81,500 jobs available in construction, more than twice as many as two years ago. Meanwhile, home sales fell nearly 22 per cent in May compared with last year, and nearly nine per cent between April and May, as the non-seasonally adjusted price of a home declined almost five per cent to $711,000 during that time period.
In order to reach housing affordability for everyone in Canada, CMHC says developers must be more productive and utilize their land holdings more efficiently.
The housing agency wants governments to make their regulatory systems more efficient so projects can be approved faster.
The CMHC notes that two-thirds of the supply gap is found in Ontario and British Columbia, two markets where affordability has declined significantly.
Around 2003 and 2004, a typical Ontario household would have needed to spend close to 40 percent of their income on an average house. British Columbians would have needed close to 45 percent. That number has now risen to around 60 percent in 2021.
Furthermore, the report says more supply is also needed in Quebec, since affordability has declined in the province.
According to RBC’s latest housing affordability report, released Thursday, the situation is at its worst since the early 1990s, and it will get worse before it gets better.
As home ownership costs rise across the country, RBC’s aggregate affordability measure for Canada increased 3.7 percentage points to 54 per cent in the first quarter of 2022.
“The Bank of Canada’s ‘forceful’ interest rate hike campaign will further inflate ownership costs in the near term, placing RBC’s national affordability measure on a path to the worst levels ever,” RBC senior economist Robert Hogue said in the report. Despite the burgeoning price correction, we believe that buyers will ultimately benefit from it.”
In the coming year, RBC believes property values will fall more than 10 percent.
The Canadian Press published this report on June 23, 2022.