BC needs 570,000 more new homes than expected by 2030 for affordability

Jun 24 2022, 11:38 pm

Canada Mortgage and Housing Corporation (CMHC) estimates the entire country will need to produce 3.53 million more homes than forecast between 2021 and 2030 in order for affordability to be restored.

This translates to increasing the total national housing supply to 22.1 million units instead of the 18.6 million units in the current trajectory. This figure accounts for both the expected population growth and creating affordability.

According to a new analysis by the federal crown corporation, meeting the higher figure would return to affordability levels last seen in 2003-2004, with British Columbia and Ontario combined accounting for two-thirds of the current 3.53 million gap.

For its share, BC needs to increase its pace by 570,000 units — elevating its total supply to 3.21 million units instead of 2.64 million units, along with a target of making 44% of these new homes affordable by technicality.

Ontario would need to generate 1.85 million units over the same period for a total of 8.56 million units instead of 6.71 million units, with 37% of the new supply deemed affordable.

Despite having a significantly higher population, Quebec’s gap of 620,000 units is similar to BC’s. Quebec needs to increase its housing supply to 5.19 million units instead of 4.57 million units, with 32% of the new homes deemed affordable. While Quebec’s home prices have traditionally been affordable, they have risen rapidly in recent years.

Of course, BC has had an affordability issue for decades, while Ontario had been relatively affordable until around 2010. Ontario’s poor affordability now matches BC, and as Canada’s largest province, this has pushed the nation’s overall affordability downwards.

“This estimate addresses both future demand increases and the current lack of affordability. In this approach, we target province-specific affordability ratios,” reads the analysis.

CMHC is urging levels of government to work with both for-profit and non-profit developers to generate the housing supply that is needed — and this goes for both rental housing and homeownership supplies.

Governments must make their regulatory systems faster and more efficient, while developers must become more productive and make full use of their land.

“Housing issues are complex and housing supply alone won’t fix housing affordability challenges for everyone. Continued government support for the most vulnerable and addressing housing inequities in the housing system are necessary to achieve affordability for all,” continues the analysis, otherwise an increasing proportion of disposable incomes will continue to go towards housing costs.

CMHC emphasizes the importance of the “filtering process” in housing supply, where more housing units created in the housing market will create opportunities for households to move into housing that better responds their needs, including pricing and housing tenure type, size of the home, and location.

“More and diverse supply across the housing system enables households to better match with housing they want – and can afford, rather than stretching their budgets to bid for living spaces in limited supply. Increasing housing supply to meet demands of middle-income Canadians means that house prices will move closer to their construction costs over time – and not driven by the cost of land,” reads the report.

However, in recent months, the inflation of construction costs relating to equipment, materials, and labour have been a real curveball for existing efforts to increase new housing supply. This includes significantly added costs and delays from supply chain issues, and ongoing pandemic-induced disruptions.

There is also a growing shortage of construction workers, especially in BC, where the number of construction workers per home under construction reached an all-time low of 3.3 in 2021. This is well below BC’s historical average of 6.1 construction workers per home under construction between 1996 and 2021. The 2021 construction worker-to-home ratio was 3.8 for Ontario, 4.5 for Quebec, and 8.4 for Alberta.

Kenneth ChanKenneth Chan

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