The Urgent Need for New Housing in Canada: Addressing the Affordability Crisis
Canada is facing a significant housing affordability crisis, with projections indicating that up to 4.8 million new homes will need to be constructed over the next decade. According to the Canada Mortgage and Housing Corporation (CMHC), this ambitious goal is necessary to restore affordability levels to those seen in 2019, a time before a surge in prices following the pandemic disrupted the market.
Identification of the Housing Supply Gap
On June 19, 2025, CMHC released a critical report detailing the nation’s housing supply gaps, highlighting the need for between 430,000 and 480,000 new housing units annually across both ownership and rental markets. This figure suggests a dramatic increase—approximately double the current pace of construction, which has only seen 90,760 housing starts recorded through May of this year. In the face of ongoing demand, CMHC anticipates an average of 245,000 starts per year over the next decade, significantly lagging behind what is needed.
Challenges and Recommendations
The task at hand is formidable. Aled ab Iorwerth, CMHC’s deputy chief economist, asserts that while doubling the pace of housing construction is achievable, it requires substantial changes to several factors. Key among these are:
- Workforce Development: A modernized and enlarged workforce is essential to ramp up construction efforts.
- Increased Investment: More private investment is vital to finance the necessary development.
- Regulatory Revisions: Streamlining regulations and reducing delays can expedite construction approvals.
- Cost-Efficiency Innovations: Adopting new technologies in construction can lead to lower development costs.
These components are critical for fostering an environment that supports growth in housing supply, which, according to ab Iorwerth, will ultimately lead to more stable housing prices over time. As more homes become available, he anticipates a reduction in aggressive bidding by Canadians, allowing for a shift towards diversification into other forms of investment.
Projected Affordability Levels
The implications of this report are far-reaching. CMHC defines housing affordability as a scenario in which housing costs do not exceed 30% of average gross household income. Currently, this ratio is expected to rise dramatically—to 52.7% by 2035—if current trends continue. However, should the proposed increase in housing starts succeed, it could lower this projection to 41.1%. This change can make a significant difference for many Canadians who are grappling with financial pressures due to soaring housing costs.
Historical Context and Current Realities
The landscape of housing in Canada shifted dramatically after 2019, largely due to the pandemic’s effects. The CMHC report emphasizes that the current needs are more urgent than previous estimates indicated. Earlier projections had suggested that Canada would need 3.5 million additional housing units by 2030, but this projection has been deemed “no longer realistic.”
The Federal Government’s Role
In light of these findings, the federal government has promised to double residential construction over the next decade, aiming for a goal of 500,000 new homes each year. This initiative includes plans for increased prefabricated housing construction and the establishment of a new entity, Build Canada Homes, which will create financing options to accelerate construction times significantly.
Regional Discrepancies and Needs
Not all regions in Canada are equally affected by the housing crisis. The CMHC report provides regional breakdowns, revealing that Ontario, Nova Scotia, and British Columbia are experiencing the most significant housing supply gaps. In Montreal, for instance, ownership costs have surged, demanding urgent intervention. In terms of provinces, cities like Toronto and Vancouver are particularly challenged:
- Toronto needs a 70% increase in home building to align with local income levels.
- Vancouver is projected to require an additional 7,200 homes each year to meet demand effectively.
Conversely, cities like Calgary have shown record levels of construction but still need to increase annual home-building by 45%. Interestingly, Edmonton does not currently face projected supply needs beyond what is already planned.
Conclusion
The urgency to address the housing supply crisis in Canada is palpable. With the goal of constructing up to 4.8 million new homes over the next decade, coordinated efforts between government, the private sector, and community stakeholders are crucial. Achieving this goal will not only restore the necessary balance in housing affordability but will also stabilize the broader economy by reducing reliance on increasingly strained housing markets. As Canadians continue to feel the pressure from escalating housing costs, the time to act is now—before affordability becomes an even more distant aspiration.
