RC114 SeptOct 2024 - Magazine - Page 42
CLOSING SHOT
WHAT IS CANADA9S POTENTIAL CAPACITY
FOR HOUSING CONSTRUCTION?
by Mathieu Laberge
INCE THE LAUNCH of Canada9s Housing Plan, and
the subsequent 2024 Federal Budget, several
analysts have questioned the country9s capacity
to build 3.87 million new homes by 2031.
While labour shortages remain a barrier to
increasing supply, roughly 650,000 workers
were building homes in Canada in 2023. This is the
most we9ve ever seen! Yet construction activity didn9t
keep pace with the growth in dedicated resources.
With the current resources, we should be building
between 130,000 and 225,000 more homes each year.
This equates to an annual pace of more than 400,000
starts per year.
Reaching this full potential will require structural
changes that go far beyond the short term. There are
adjustments occurring across the country right now
that may help get us closer to this goal, such as changes to regulations at the municipal level. That said,
more can and must be done by governments and the
industry to achieve greater housing outcomes.
Until the mid-2000s, housing starts were closely aligned with
employment and gross domestic product (GDP) in residential
construction. In the following years, despite increased investment in
residential construction through both funding and labour, the pace
of construction did not keep up.
We can analyze actual housing starts relative to the construction
industry9s maximum potential capacity, just like economic production and employment. One example would be what was built versus
our national capacity to build with our current resources.
We looked at diferent ways of determining Canada9s potential
housing starts production. Our estimates indicate that starts in 2023
were far behind potential. There were 240,267 housing starts in Canada in 2023. Roughly speaking, Canada9s potential annual housing
production could exceed 400,000 new homes.
We looked at the average number of workers needed for each
housing unit started orst. This can be seen as an estimated measure
of labour productivity in the residential construction industry.
From 1999 to 2004, workers per housing starts were much lower
than current numbers, implying that productivity was higher 20 to
25 years ago.
We estimated that potential housing starts in Canada could have
reached nearly 400,000 in 2023. This is about 70 per cent higher than
the total number of units started that year, we used current industry
employment levels and assumed past productivity levels could be
achieved.
In our most recent Housing Supply Report, the ratio of housing
starts to population difered vastly across Canadian Census Metropolitan areas (CMAs), by a factor of two or more.
This approach looked at starts per population in Calgary, Edmonton and Vancouver. Historically, the ratio for housing starts is higher
in these cities.
This approach assumes that housing preferences and situations
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RENEW CANADA – SEPTEMBER/OCTOBER 2024
We should now engage in a discussion about how
municipal and provincial regulation can enable the
scaling of housing development in Canada.
are fairly consistent across the country, in theory. Other factors, such
as economic context, industrial organization and regulations could
innuence this ratio diferently across cities.
If housing starts across Canada mirrored the best performing
markets last year, added supply would have been close to 430,000 new
units.
Recently, I argued that a broad mobilization was needed to ox our
housing crisis. We should now engage in a discussion about how
municipal and provincial regulation can further enable the scaling of
housing development in Canada.
In addition to billions of dollars committed and invested in new
construction and renovations over the past decade, it has recently
introduced the Housing Accelerator Fund, a program designed to
fund regulatory changes at the municipal level to accelerate housing
construction.
A signiocant dialogue needs to occur on what employers, trades
unions and employees in the residential construction industry are ready
to contribute in terms of scaling up housing starts and getting Canada
to its full potential, in exchange for greater regulatory nexibility.
RESCON
Mathieu Laberge is Senior
Vice-President, Housing
Economics and Insights with the
Canada Mortgage and Housing
Corporation (CMHC).
RENEWCANADA.NET
