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More than 22 million housing units needed by 2030 to solve Canada’s affordability crisis, says CMHC

The Canada Mortgage and Housing Corporation (CMHC) says an additional 3.5 million homes need to be built by 2030 to become affordable.

The agency released a report on Thursday explaining the need for a different approach to the housing shortage at a time of rising demand and affordability concerns.

“Rising supply will be difficult. Critically, raising supply takes time as construction time is important, but time to progress through government approval processes is everything. as much,” the report said. “This delay means we must act today to achieve affordability by 2030.”

  • You can read the full report at the bottom of this story.

If current rates of new construction continue, CMHC said the country’s housing stock is expected to grow by 2.3 million units by 2030, to nearly 19 million units in total. But in order to achieve affordability for all Canadians, the agency said an additional 3.5 million homes are needed.

However, easing housing market conditions and a labor shortage in the construction sector could stand in the way of Canada’s housing stock reaching more than 22 million by 2030.

“There are supply issues, labor shortages right now and the cost of financing is going up, so there are clearly some short-term challenges,” the deputy chief economist said. CMHC, Aled ab Iorwerth, during a conference call.

BMO economist Robert Kavcic says it will be difficult to achieve what CMHC wants to achieve.

“The unemployment rate in the construction sector is near a record low; vacancies are at an all-time high, we have a severe shortage of skilled trades and the cost of building materials is already rising rapidly,” he said. he declared. “So unless the economy really recovers and needs some stimulus, it will be extremely difficult to double the rate of new construction over the next decade without significant inflationary pressure.”

Regulatory systems need to be more efficient, says CMHC

There were 81,500 construction vacancies in the first quarter of 2022, more than double the number seen in the first quarter two years ago. Meanwhile, home sales fell nearly 22% in May from a year ago, and nearly 9% between April and May, as the unadjusted average price of a home fell nearly 5% to reach $711,000 during this period.

According to CMHC, to make housing affordable for everyone in Canada, developers will need to become more productive and take full advantage of real estate to build more units.

The housing agency also says governments need to make regulatory systems more efficient so projects get approved faster.

CMHC notes that two-thirds of the supply gap is in Ontario and British Columbia, two markets that have faced significant declines in affordability.

Around 2003 and 2004, an average household would have had to spend almost 40% of its income on the purchase of an average house in Ontario and almost 45% in British Columbia. In 2021, this number is close to 60%.

The report says additional supply would also be needed in Quebec, as affordability in the province has declined in recent years.

Situation to get worse before it gets better

RBC’s latest housing affordability report released Thursday shows the situation is the worst since the early 1990s and will get worse before it gets better.

RBC’s overall affordability measure for Canada rose 3.7 percentage points to 54% in the first quarter of 2022, as homeownership costs rose across the country.

“The Bank of Canada’s ‘vigorous’ interest rate hike campaign will further inflate short-term home ownership costs, putting RBC’s national affordability measure on course for worst levels on record,” the bank said. RBC Senior Economist Robert Hogue in the report. “However, we see the burgeoning price correction finally bringing some relief to buyers.”

RBC estimates that property values ​​will fall by more than 10% over the coming year.