Canada Needs All Hands on Deck to Address The Housing Affordability CrisisAugust 28, 2023
Written by Jimmy Jean, Chief Economist at Desjardins Group.
Canada takes pride in its multiculturalism, universal healthcare, and commitment to human rights and social welfare. In 2019, when the nation was already grappling with housing affordability issues, the federal government officially recognized housing as a fundamental human right as part of the National Housing Strategy. Yet, four years later, our progress is still lacking. The housing affordability crisis has escalated, tarnishing Canada’s global reputation as a land of opportunity. But the crisis is doing more than just making international financial headlines — it’s tangibly impacting our socio-economic performance.
Our research team recently delved into the state of Canadian youth, uncovering several disconcerting trends. A lack of affordable housing has forced young Canadians to postpone major life milestones such as forming families. Even though young people today have more education and financial literacy skills than previous generations, many of them are buying their first home later in life, which diminishes their lifetime wealth accumulation potential.
Housing affordability features prominently in discussions about social well-being and how it’s measured. Many economists don’t believe traditional metrics like GDP and employment are adequate, advocating for a comprehensive evaluation that encompasses health, equality and quality of life using indicators such as housing. A group of scholars recently formed the G15+ collective to monitor these well-being indicators. It looks at variables such as households in core housing need, housing vacancy rates and homelessness. That said, housing’s indirect impact on Canada’s social well-being — through its role in contributing to inequality, and challenges with newcomer integration and health outcomes — should not be overlooked either.
The housing affordability crisis also undermines the economic model we’ve heavily banked on since 2016. The aim of robust immigration is to mitigate the impact of Canada’s aging population, address labour shortages and help sustain long-term public finances. But we’re not the only advanced economy positioned to harness demographic growth. Germany, Australia, the UK and other nations have joined the global race for talent. And the more Canada struggles to provide newcomers with a realistic path to achieving their dreams, the more attractive other countries will be.
To avoid this outcome, immediate action is needed to give Canadians the affordable housing they need. In a report published last week, our team at Desjardins looked at policies implemented around the world to boost housing stock. We found that easing regulatory and policy barriers to constructing owner-occupied housing is paramount. Examples of these obstacles abound, from parking requirements to residential zoning regulations. Reducing development fees for purpose-built rentals is also essential. Vancouver’s Rental 100 program is a positive step, with evidence pointing to increased rental housing starts. We’re in favour of other measures as well, such as waiving HST and offering direct supply-side subsidies to purpose-built rental developers.
But homebuilding incentives won’t be enough. Progress also hinges on the efficiency of Canada’s construction industry. Lagging productivity growth in this sector compared to the broader economy has led to inefficiencies, protracted project timelines and escalated costs. Adopting advanced technologies, streamlined processes, automated and prefabricated solutions, and improved project management can expedite construction while enhancing Canada’s overall productivity. That’s because such improvements would also benefit infrastructure projects, commercial developments and public works. Our report lays out a number of other recommendations as well.
Action is long overdue. By our estimation, national housing starts must surge by roughly 50% immediately just to offset the post-pandemic increase in permanent residents. And that doesn’t even address the spike in non-permanent residents. Overcoming our homebuilding challenges will require a coordinated effort driven by effective policies from all levels of government. It’s a herculean challenge, but failure is not an option.