Canada’s Housing Plan: A Comprehensive Look at Ambitions and Realities

In recent years, Canada has faced a pressing housing crisis, characterized by skyrocketing prices and a severe shortage of affordable options. In response, the federal government has launched “Canada’s Housing Plan,” aiming to tackle these issues head-on with ambitious targets and measures. This plan seeks to address the pressing demand for housing while also promoting affordability and sustainability. But how feasible are these goals? Let’s explore the key aspects of this initiative and the challenges that lie ahead.

Ambitious Targets for New Housing

The federal government’s plan sets an ambitious target of 3.87 million new homes by 2031. This figure breaks down into 2 million net new homes over and above the 1.87 million forecasted by the Canada Mortgage and Housing Corporation (CMHC). Achieving this vision implies that approximately 550,000 new homes must be completed each year from 2025 to 2031, a figure that significantly surpasses historical averages. For context, in 2022, Canada saw the completion of 219,000 homes, which was a slight decline from 223,000 in 2021. The long-term average sits around 175,000 units, making the federal target of 550,000 seem daunting at best.

Breaking Down the Goals

The target of 2 million additional homes primarily consists of 1.2 million homes through the plan itself and an additional 800,000 homes that depend on support from other levels of government. Notably, the government’s target is still conservative compared to CMHC’s goal of 5.8 million new homes by 2030, which is designed to restore housing affordability to levels seen in 2003/04.

Demand Measures: Modest If Any Impact

While attempting to boost housing supply, demand-side measures in the plan may yield limited outcomes. Some efforts, such as extending amortization periods for first-time homebuyers (FTHBs) from 25 to 30 years, may only marginally affect the overall market. This is particularly true as this extension applies only to newly built homes, a relatively small segment of the broader housing market.

Other measures include increasing the Homebuyers Plan withdrawal limit from $35,000 to $60,000. This change is expected to provide modest relief, primarily benefiting households that rely on personal savings or gifts (which accounted for nearly 62% of first-time homebuyers’ down payments between 2018-2020). However, these withdrawals form a small percentage (only 8%) of total down payments, highlighting the limited scope for significant change.

Supply Policies: Facing Multiple Headwinds

The ambitious supply targets face a variety of challenges. Currently, housing starts are trending at around 242,000 units, close to historical highs. Compounding the challenges are interest rates, which remain elevated despite anticipated cuts by the Bank of Canada in the coming months. The construction industry is already overstretched, grappling with worker shortages and the need to compete with non-residential projects for tradespeople.

Additionally, several key aspects of the plan require cooperation from provincial and municipal governments, which may be slow to act. Measures including funding for critical infrastructure and unlocking surplus public lands necessitate extensive coordination, which could impede timely progress.

Fostering Purpose-Built Rentals

A salient feature of the housing plan is the focus on purpose-built rental units. The Apartment Construction Loan Program will be enhanced by $15 billion to facilitate low-cost loans for rental projects. This initiative aims to generate an additional 30,000 rental units, a crucial step given the pressing demand for affordable rentals. These efforts, although important, may take time to materialize within the broader housing landscape.

Enhancing Construction Productivity

To combat productivity challenges in the construction sector—which has seen a decline while other industries have improved—the government is implementing several innovative strategies. This includes:

• Standardized housing catalogues to streamline design processes
• Investment in new home-building technologies like modular construction
• Modernization of the National Building Code to align with contemporary practices

These measures have the potential to bolster the industry, which has been historically sluggish in terms of productivity.

Additional Measures for Renters and Vulnerable Populations

The plan doesn’t just focus on new construction; it includes initiatives aimed at supporting renters and vulnerable populations. The Affordable Housing Fund will receive a $1 billion boost, making it easier to access funds for vital projects. Additionally, specific provisions will be made for Indigenous housing and the development of co-operative housing models.

Conclusion: A Daunting Yet Necessary Path

While Canada’s Housing Plan is undoubtedly ambitious, its success will depend heavily on execution and collaboration at various government levels. The targets set forth are crucial for addressing the country’s housing crisis, but they present significant challenges in terms of feasibility and timeline.

Demand-side measures may provide only marginal relief, with the overarching effect likely to be felt over the long term. As the Canadian population continues to grow, and with it the need for housing, the next few years will serve as a litmus test for the plan’s effectiveness in creating a more affordable and sustainable housing market for all Canadians. The journey toward meeting these ambitious targets will require dedication, innovation, and most importantly, a unified approach across all levels of government and the private sector.