Canada will be about 3.5 million housing units short of what would be needed to restore affordability by the end of the decade, the Canada Mortgage and Housing Corporation (CMHC) warned on Wednesday.
Its estimate is similar to last year’s, but that’s because the federal housing agency now expects weaker economic growth to reduce demand, which should offset the slowdown in construction of housing observed in the last year.
“We were too optimistic about Ontario’s growth coming out of the pandemic,” explained CMHC Deputy Chief Economist Aled ab Iorwerth.
Slower growth and resulting lower incomes mean the agency expects more people, especially in Ontario, to continue living with parents or roommates, and more to continue trends that prevent people from looking for their own home.
“You know, we hear about divorced couples who stay together because they can’t afford to live in separate homes,” said Mr. ab Iorwerth.
Lower growth projections for Ontario have helped reduce the province’s deficit by about 370,000 units, but Ontario still has the largest gap by far at 1.48 million units. .
Other provinces, however, have seen their predicted affordability gap widen due to stronger economic and demographic trends.
Quebec needs about 860,000 more housing units than forecast, an increase of 240,000 units from last year, and British Columbia needs 610,000, an increase 50,000 over one year. The gap in Alberta signals a need for 130,000 additional housing units, compared to 20,000 in the June 2022 projections.
The overall pace of construction has slowed due to a combination of labor constraints, rising costs of supplies and higher interest rates, which make it more difficult to finance projects, Mr. ab Iorwerth.
Taken together, these pressures mean that CMHC now expects about 390,000 fewer homes to be built by the end of the decade than it forecast last year.
Overall, CMHC estimates that 3.45 million housing units are needed beyond current construction trends, compared to 3.52 million in its June 2022 outlook.
Impact of immigration
The forecast is also based on a significant drop in immigration after 2025, the year the federal government is targeting 500,000 new arrivals. If immigration trends continue at current rates, the housing deficit will reach four million units by 2030.
Conversely, in an even lower economic growth scenario, the gap could narrow to 3.1 million units.
The agency’s goal is based on the level of affordability in 2004, when housing costs were relatively low and the economy was stable. CMHC aims for an environment where housing would require around 30% of income in most provinces, but this target is 37% in Ontario and 44% in British Columbia.
Mr ab Iorwerth says restoring affordability will be difficult given the complexity of the challenge, but notes that it is encouraging to see governments stepping up their response to the situation.
“What is encouraging is that we are now seeing policy actions from all levels of government; the Ontario government has taken action, the federal government is taking a step forward,” he stressed.
“We hope to see these policy measures start to bear fruit in the future and see an increase in construction rates. »