Just last month, the Canada Mortgage and Housing Corporation (CMHC) sounded the alarm on Canada’s unprecedented housing crisis. They project that to bring affordability down to 2019 levels, we’ll need to construct as many as 4.8 million additional new homes in the next ten years. This dire forecast requires us to act urgently. We need to make policy improvements to address these interprovincial trade barriers that are stalling construction projects.
CMHC forecasts that between 430,000 and 480,000 new housing units are required annually across both ownership and rental markets by 2035. This figure is roughly twice the recent rate of residential construction in Canada. That’s happening at a time when the country is only averaging about 245,000 housing starts per year. This shortfall has dire consequences. They estimate that average rents will continue to increase by 3.1 percent, well above projected income growth.
The Importance of Interprovincial Trade
Another major cause of the housing crisis is the patchwork of interprovincial trade barriers we have here in Canada. CMHC chief economist Mathieu Laberge stressed the importance of addressing these bottlenecks to better enable movement across the country, including creation of an improved west-to-east transportation corridor infrastructure.
“That means the country doesn’t use all that it produces, and a significant share of our domestic production could be redirected towards residential construction in Canada,” – Mathieu Laberge
CMHC contends that very loosening of these barriers will result in CMHC’s anticipated increase of 132,000 housing starts. They estimate that number will climb to about 280,000 per year, taking some of the strain off the nation’s housing market. Statistics Canada’s latest Business Conditions Survey found that almost half of Canadian construction companies are afraid to purchase products or services from other provinces. They list distance and the cost of transportation as their biggest barriers.
Domestic Resources and Construction Capacity
Canada has strong domestic production of key construction materials, such as wood, aluminum, iron, and steel. The heavy hand of provincial regulations makes it difficult to use these resources efficiently and effectively on housing projects. CMHC Report estimates that eliminating interprovincial trade barriers would double the current annual housing supply. This increase would go a long way toward covering almost 15 percent of the additional housing we’ll require over the next 10 years to reach pre-pandemic affordability levels again.
Laberge reinforced that addressing interprovincial barriers is an important, initial step in addressing Canada’s housing supply challenge. He noted we’re nowhere close to done—there’s a long road ahead.
“Since increased income is expected to increase demand for home ownership, housing supply must increase to at least match the increase in demand in order to maintain or improve affordability,” – Mathieu Laberge
The Role of Provincial Authority
Here’s where the federal government can start by jumpstarting policies that reduce red tape and increase interprovincial collaboration. Ultimately the provinces have the primary authority when it comes to building new housing. This separation of responsibility creates a labyrinthine path toward much-needed reforms.
Experts argue that without coordinated efforts among provinces and between different levels of government, Canada’s housing crisis may continue to worsen. Nonprofits are saying average rental prices are going up, but there’s this demand for ownership. So it’s time for all stakeholders—federal, state, local, and private—to come together and have a serious conversation about increasing housing supply.
