Politics

How Ottawa plans to jump-start housing construction next year

Ottawa wants to help municipalities build 100,000 new ‘middle-class’ homes by 2025. How does it plan to get there?

The federal government wants to help municipalities build 100,000 new ‘middle-class’ homes by 2025

Housing experts say the Liberal plan to increase Canada's housing supply falls short of what the country needs. (Jane Robertson/CBC)

The average cost of Canadian housing went wild during the COVID-19 pandemic — and now there's a broad consensus that Canada badly needs to build more homes.

Adding new supply could slow the housing market's dramatic price gains, giving hope to would-be home buyers and ensuring more Canadians have access to adequate housing that's within their budget.

"We can have people live closer to where they work. We can reduce commutes. We can reduce Canada's greenhouse gas footprint," said Mike Moffatt, a senior director at the Smart Prosperity Institute who tracks demographics and housing trends.

Moffatt's work has uncovered dramatic shifts in population movements during the pandemic — including an exodus of young families from overpriced cities to suburbs and smaller communities.

"This is going to take time ... going all the way from approval stage to being built, it can take years. So this is not going to be solved overnight, but there's no time like the present to start," he said.

The major federal parties and economists at Canada's major banks tend to agree that new housing is needed to create a more stable real estate market.

What's less clear is how the federal government should go about funding new construction, and how much is actually needed.

A pillar of the re-elected Liberal government's plan to build new housing is the new $4 billion Housing Accelerator Fund, which has a goal of building 100,000 new "middle-class" homes by 2025.

The program, launched under the government's larger National Housing Strategy, will give money directly to municipalities that demonstrate an ability to speed up new residential construction.

The money is conditional but Ottawa says cities and towns can apply for funding by doing things like reducing approval times for construction, updating dated zoning bylaws and building housing near public transit.

Ottawa also has earmarked $2.7 billion to repair and build new affordable housing units.

Ahmed Hussen became the Liberal government's first minister responsible for housing following the 2021 federal election. (Sean Kilpatrick/The Canadian Press)

Ahmed Hussen, the minister responsible for housing, said the various home construction and repair programs introduced by his government are showing results already.

"Taken all together, we're talking about hundreds of thousands of new, affordable homes for people," he told CBC News.

Are the government's targets ambitious enough?

The Conservatives have been particularly focused on the need for more housing supply. The party's platform included a pledge to build a million new homes over three years. The Liberal government's smaller target for new housing exposed it to question period attacks when Parliament reconvened.

"There is simply no inventory. This is where the Liberals have failed to address the real problem of housing supply," said Conservative MP Matt Jeneroux in the House of Commons on Dec. 9.

Figures compiled by the Canada Mortgage and Housing Corporation (CMHC) suggest, however, that new housing construction increased in November and overall activity "remains high in historical terms."

CMHC's latest report found that new housing starts across Canada increased by 26 per cent between October and November, when adjusted for seasonal fluctuations.

Single-family homes under construction in Vaughan, Ont. (David Donnelly/CBC)

And while the CMHC says housing construction remains high by Canadian standards, others have warned that Canada is still well behind comparable nations.

According to a 2021 report by Scotiabank, new housing construction in Canada has been in decline relative to population since 2016. A report from the bank said that Canada would need to build 1.8 million new homes to reach the G7 average of 471 homes per 1,000 residents. In Canada, the ratio is 424 homes for every 1,000 residents. 

Real estate prices also keep reaching new heights. The price of an average Canadian house hit a record of $720,850 in November.

"We know more supply is one of the solutions," Hussen said of Canada's relentless price increases. "So that is exactly what we will do."

All supply isn't created equal, expert says

Jill Atkey, CEO of the B.C. Non-Profit Housing Association, said Ottawa should prioritize rental housing when funding new construction.

"I think the [Housing Accelerator Fund] absolutely looks very encouraging. But we should not approach it from the perspective that all supply is the same supply," said Atkey.

A for-rent sign.
Canada 'desperately' needs more rental accommodation, says the CEO of the B.C. Non-Profit Housing Association. (David Horemans/CBC)

"[Ottawa needs] to be incentivizing the types of supply that our communities so desperately need."

The Liberal government has promised to spend $600 million to convert empty office space into new rental housing, but it has not set a target for the number of rental units it hopes to create.

That will be among the many programs being watched by experts like Moffatt as they assess the federal government's housing plans for 2022.

"I'm certainly looking forward to seeing what happens," Moffatt said.

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