Restoring Canada's previous housing affordability levels isn't realistic: CMHC | Daily Hive

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Canada must dramatically increase the pace of home construction — nearly doubling current annual housing starts — to address the country’s deepening housing affordability crisis, according to a new report from the Canada Mortgage and Housing Corporation (CMHC).

In its updated annual analysis of Canada’s housing supply shortage, CMHC estimates that the country needs to build between 430,000 and 480,000 housing units annually until 2035, up from the current trajectory of about 250,000 units per year. The aim is to restore affordability to levels last seen in 2019, prior to the pandemic-driven housing boom.

The federal Crown corporation has shifted its modelling framework to a rolling 10-year horizon, abandoning its earlier 2030 benchmark, which it now considers unrealistic due to the lengthy timelines needed for land use approvals and construction.

“Restoring affordability to levels last seen two decades ago isn’t realistic, especially after the post-pandemic price surge,” the report states, emphasizing that post-pandemic market conditions have introduced new structural challenges, particularly in the high-cost regions of Metro Vancouver and Greater Toronto.

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CMHC’s revised affordability metric, which compares adjusted house prices to average household income, reveals sharp declines in affordability across most areas. In Metro Vancouver, the house price-to-income ratio rose from 71 per cent in 2019 to 99 per cent in 2024. In Greater Toronto, the ratio climbed from 59 per cent to 74 per cent.

Areas that were relatively affordable pre-pandemic — such as Nova Scotia, New Brunswick, and Manitoba — have also seen relatively steep affordability declines due to population influx and limited supply growth.

The required rate of new housing starts varies significantly by region. In Greater Montreal, for instance, CMHC suggests a 210 per cent increase in annual housing starts over the next decade, while Ontario (outside of Greater Toronto) would need a 228 per cent boost. Even smaller provinces like Nova Scotia and Prince Edward Island would need to more than double their housing output to meet affordability targets.

Compared to Ontario and Quebec, British Columbia outside Metro Vancouver actually fares better, with a 102 per cent supply boost needed over the coming decade. Within Metro Vancouver alone, a 29 per cent increase is needed.

By contrast, markets like Edmonton and parts of Quebec and the Maritime provinces are on track to maintain affordability without requiring additional supply — though CMHC notes that these regions still face other housing challenges, including homelessness.

The report incorporates more advanced modelling techniques that account for “feedback effects.” For example, if housing becomes more affordable in one city, it could attract new residents, increasing demand and requiring even more housing to be built. CMHC also projects that restoring affordability could increase the number of households in Canada by two per cent by 2035, particularly among younger adults forming new households.

Price and rent projections under increased housing supply scenarios suggest that average home prices in Greater Toronto would be nearly 20 per cent higher than the status quo by 2035, while Metro Vancouver and the rest of B.C. would see increases of 8.3 per cent and 5.5 per cent, respectively.

Increasing housing supply to a prescribed level would lead to modest declines in average rents across major Canadian cities by 2035. In Greater Toronto and Greater Montreal, average rents are projected to fall by 6.1 per cent, while Metro Vancouver would see a 2.7 per cent decrease. Calgary is expected to experience a six per cent drop in rents, whereas Edmonton would see a more modest decline of just 1.4 per cent. These figures suggest that while supply-driven affordability gains in the rental market are possible, the impact varies depending on regional market conditions and the scale of new construction.

Beyond construction volume, the report calls for a need for “a significantly greater workforce,” enhanced private sector investment, and productivity improvements in the residential construction industry.

Private sector-led projects overwhelmingly account for the vast majority of new housing supply in Canada. However, they are challenged with escalating construction costs, persistently high construction financing costs, and sluggish pre-sales demand, which has rendered a growing number of projects unfeasible.

CMHC suggests that adopting prefabricated modular and other offsite construction methods could help alleviate labour bottlenecks and reduce costs. This is already an emerging strategy for Prime Minister Mark Carney, who has appointed Gregor Robertson — a former mayor of Vancouver and a former executive of a prefabricated construction company — as the new federal Minister of Housing.

Without a range of interventions, by 2035, CMHC warns that national monthly average rents could rise to over $1,900 (from about $1,400 today), and average home prices could soar past $1.9 million in Metro Vancouver (up from $1.5 million in 2024) and Greater Toronto (up from $1.2 million in 2024), further exacerbating Canada’s affordability crisis.

“This is not a forecast, but an illustration of what needs to happen if Canada is serious about restoring affordability,” emphasizes CMHC.

In comparison, much more moderate average home price increases could be seen in Alberta’s urban centres, with a rise to $809,000 in Calgary (up from $614,000 in 2024) and $542,000 in Edmonton (up from $410,000 in 2024).

By 2035, Canada’s population could reach nearly 45 million people — up from more than 41 million today.

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