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Affordable housing crisis in Canada, adding supply is only solution, says report

The housing market was hot even before the COVID-19 pandemic hit, with prices leaving many wanting to purchase a home frustrated, but in the last few years that difficulty has soared as prices skyrocketed.

Toronto: Canada must build an extra 3.5 million homes to get its housing market, one of the least affordable in the world, back in line with local incomes, according to The Canada Mortgage and Housing Corp. (CMHC).

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

“Increasing supply will be difficult. Critically, increasing supply takes time because the time to construct is significant, but so is the time to progress through government approval processes,” the report reads. “This delay means that we must act today to achieve affordability by 2030.”

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

Softening housing market conditions and a labour shortage in the construction sector could get in the way of bringing Canada’s housing stock to more than 22 million by 2030, however.

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

Prime Minister Justin Trudeau has made addressing Canada’s spiralling housing costs a top priority, announcing a plan to double the pace of new home construction. Home prices nationwide soared more than 50% in two years, putting them further ahead of local incomes than in any other country except Portugal, according to an analysis by Bloomberg Economics.

Regulatory systems must be more efficient, CMHC says. The CMHC notes that two-thirds of the supply gap is found in Ontario and British Columbia, two markets that have faced major declines in affordability.

Around 2003 and 2004, an average household would have had to devote close to 40 per cent of their income to buy an average house in Ontario, and close to 45 per cent in British Columbia. As of 2021, that number is close to 60 per cent.

Parvasi Media Group

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