The Canada Mortgage and Housing Corporation released a new report on housing affordability in Canada. It argues that achieving the targets of a more affordable housing stock by 2030 requires a radical change in the way the housing industry is operated. This means more private sector investment, more housing supply, and more government programs.
According to the report, the current stock of affordable housing units is 1.3 million lower than what is needed. If this gap is not addressed, the number of homes available in the market will fall to 3.5 million by the year 2030. CMHC estimates that housing starts will remain above historical averages through the forecast period. However, that is not enough to bring housing affordability up to par. In order to achieve these goals, the corporation argues, the government and the private sector must work together to create better conditions for both parties.
One of the challenges facing the housing industry is the high levels of household debt. According to the report, this debt is one of the factors that make it difficult for Canadians to buy a home. With high rates of mortgage qualifying, would-be buyers are being forced out of the market. Moreover, the Bank of Canada’s efforts to combat inflation have made buying a house more expensive in Canada.
According to the report, the cost of a typical home in Vancouver devoured 82 per cent of the median household income. Home ownership rates in key metro areas remain above 65 percent. Despite the fact that home prices are now lower than they were a few years ago, home ownership is still out of reach for many. A growing demand for rental housing is also expected to have a negative impact on home ownership affordability.
Another issue facing the housing market is the shortage of construction in major markets. CMHC suggests that a major factor responsible for the slow pace of building in Canada’s largest metropolitan areas is the red tape that is associated with it.
According to the report, the supply of rental housing in the country is insufficient to meet the increasing demand for housing. While the federal government has introduced several programs to alleviate the problem, the private sector must play a larger role. To increase the number of homes available, CMHC suggests that the government must work with the private sector and create a new housing model. For instance, the federal government could offer incentives to developers to build more social housing and rent subsidies. Alternatively, the government could help to redevelop existing properties to make them more affordable.
According to the report, the rate of core housing need in Canada is 10.1 per cent. This is higher in the capital cities. Also, the average shelter-cost-to-income ratio is above 30 per cent for the median household.
The government has a lot of work ahead of it to achieve its housing targets for 2030. Currently, 1.7 million people are unhoused. And while the CMHC’s estimates are only based on the national landscape, the report argues that drastic measures must be taken to address the problem.
Monthly seasonally adjusted annual rates of housing starts
The number of housing starts in Canada increased in October and November, according to the monthly seasonally adjusted annual rate (SAAR) released by the Canada Mortgage and Housing Corporation. This is an important indicator for Canadian and Canadian-based homebuilders and realtors, as it provides insight into the level of new home construction activity across the country.
The multi-unit segment, which includes apartments and condominiums, is largely responsible for driving the new home market in Canada. It also varied considerably from month to month, as construction in some areas continued to slow while other markets saw large increases in construction activity.
In terms of the single-detached sector, starts grew eight percent in September, and six percent in October. This segment is largely driven by Toronto and Vancouver, where starts remained more or less unchanged compared to last year. However, Ottawa-Gatineau started at the lowest level in over a year.
Overall, the number of starts in Canada was estimated at 195,274 in October. This is a tenth of a percent more than the previous month’s SAAR, which dropped to 202,057 units. Starts in the Toronto Census Metropolitan Area were the highest in nearly two years, with 45,109 units recorded in 2022.
New home sales in Canada are at their lowest since 2014, with the latest CMHC report suggesting the combination of tighter lending rules and rising mortgage rates is making home buying harder. According to CIBC economist Royce Mendes, these factors are also causing a shortage in the supply of new homes for sale, which is contributing to slowing sales. He believes the supply will eventually reach a balance, but he expects it to remain at a moderate pace through the rest of the year.
The number of starts in the National Capital Region declined by 25 percent in November. Starts in Ontario and Atlantic Canada also decreased. Montreal and Kelowna saw large increases in the month, while Moncton saw the largest increase, with a 451 percent increase from the month before.
Other regions saw modest declines, including the Prairies and Atlantic Canada, where starts in these areas fell three percent and five percent, respectively. However, urban starts in those areas increased in October and November. During that same period, the six-month trend in housing starts jumped from 266 to 266, a sign that the housing supply may be improving.
A six-month moving average is used in conjunction with the monthly SAARs to assess the trend in housing starts. Monthly starts are measured by the number of homes built in a given month, and the six-month trend is then calculated by dividing the number of starts in a given month by the number of starts in the same month in the prior year.
The trend for new builds is considered the most accurate measure of the future supply of new homes because it accounts for swings in monthly estimates, such as those caused by the seasonality of the housing market. Currently, the trend for new homes in Canada is 276,374 units, which is up 0.5% from the previous month’s numbers.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.