Understanding Canada’s Housing Affordability Crisis: The Disconnect Between Population Growth and Housing Supply

By Josef Filipowicz and Steve Lafleur
March 30, 2023
PDF of commentary

Introduction

Housing affordability has risen to the forefront of public concern in Canada. This issue consistently appears among the top priorities for voters during elections at all levels of government. As increasing numbers of Canadians face difficulties in securing affordable housing, policymakers are under growing pressure to respond effectively. However, a crucial aspect often overlooked in these discussions is the intricate relationship between government policies affecting population growth—thus impacting housing demand—and the growth planning policies that regulate housing supply.

This article explores the widening disconnect between these vital elements in Canada’s housing landscape. It will outline the gap between population growth and housing completions, delve into the intricacies of immigration as a primary driver of population increase, and examine the issues inherent in growth planning policies that hinder timely and adequate housing supply.

The Growing Gap Between Demand and Supply

At the heart of Canada’s housing affordability crisis lies a significant imbalance between housing demand and supply. As Canadians continue to seek shelter—driven by increasing population numbers—the rate of new housing construction remains alarmingly low.

An In-Depth Look at Population Growth and Housing Completions

Statistics show that annual population growth has steadily increased over decades, climbing from fewer than 300,000 in the 1970s to approximately 400,000 in recent years. Conversely, housing completions have declined, with yearly rates that have not consistently met the prior standards set in the 70s when over 200,000 new units were regularly erected.

The data reveals a troubling trend: as Canada grapples with soaring population numbers, the housing market has not responded adequately, leading to a persistent and worsening shortfall in available homes. This disparity is exacerbated by years of underbuilding, setting the stage for the current affordability crisis.

Demand: Immigration and Its Relation to Housing Supply

A significant component driving population growth in Canada is immigration. Notably, Canada has become increasingly reliant on immigration to bolster its growth since the 1990s. Currently, the federal government sets ambitious immigration targets through yearly Immigration Levels Plans, with plans aiming for record-high admissions—465,000 immigrants in 2023, 485,000 in 2024, and 500,000 in 2025.

The Oversight of Housing Supply in Immigration Policy

What’s particularly concerning is that these immigration targets are developed without robust considerations of existing housing supply constraints, as outlined in federal-provincial agreements. While provinces are consulted regarding immigration levels, explicit references to the necessity of adequate housing supply in these discussions are lacking.

Several provincial leaders, including Ontario Premier Doug Ford and British Columbia’s Housing Minister Ravi Kahlon, have expressed concerns about the need to reconcile immigration numbers with housing supply capabilities. Their advocacy points toward an increasing recognition of the need for a cohesive approach that aligns immigration policy with housing infrastructure planning.

Supply: The Challenges of Growth Planning Policies

Growth planning—how provinces and municipalities estimate housing needs and plan for community development—faces significant challenges that stem from outdated practices and poor enforcement.

Lengthy Growth Planning Processes

The processes involved in growth planning often take years, complicating efforts to align housing supply with demand adequately. For example, the Ontario government’s Growth Plan for the Greater Golden Horseshoe was initially implemented in 2006, with updates in 2019 and 2020, creating bottlenecks in timely planning. Municipalities within this framework then have several years to catch up with updated growth plans.

Inadequate Demand Projections

Additionally, growth plans frequently fail to accurately anticipate future demand. The rapid influx of new immigration numbers should inform future housing targets, but existing plans often operate on estimates that can be years out of date. This misalignment leaves communities ill-prepared to accommodate increasing populations.

Poorly Enforced Provisions

Finally, while many growth plans include targets, actual enforcement mechanisms are often insufficient. With few means of holding municipalities accountable for meeting their planning targets, the discrepancy between projected and actual population growth remains worrying.

Consequences of the Disconnect

The failure to address the gap between demand and supply has tangible consequences. Rising housing costs are not isolated to low-income individuals; middle-class families and newcomers face increasing challenges in securing affordable housing.

Moreover, high housing costs have broader implications for the economy. They hinder mobility, limiting workers’ ability to seek better opportunities and potentially impacting overall economic growth—a phenomenon referred to as "spatial misallocation."

Additionally, the pressures of housing affordability can potentially deter immigrants and international students from choosing Canada, thus undermining immigration policy objectives aimed at enhancing skilled labor in the country.

Proposed Solutions

To tackle the issues plaguing Canada’s housing sector, a multi-faceted approach is needed. Both demand and supply sides of the equation require attention to ensure improvement in housing affordability.

Enhancing Coordination Among All Levels of Government

Firstly, greater coordination between federal, provincial, and municipal governments is required. The federal government must recalibrate its immigration targets with insights derived from local capacities for housing development. This could involve amending immigration-related legislation to ensure housing supply constraints are considered during target setting.

Additionally, provinces should enhance their growth planning processes. This could include shortening timelines for planning, ensuring that projections are aligned with current immigration targets, and instituting firmer enforcement mechanisms to ensure that communities meet their housing obligations.

Incentivizing Municipalities for Increased Housing Construction

Incentives for municipalities to facilitate housing construction could also yield positive results. By tying infrastructure funding to housing outcomes or zoning reforms, governments can create a more conducive environment for new housing projects.

Conclusion

Canada’s housing affordability crisis is a multifaceted issue that stems from a disconnect between policy-making and the realities of population growth and housing supply. By addressing the lack of inter-governmental coordination and aligning housing demand with supply mechanisms, Canada can hope to mitigate its housing challenges and build a more sustainable future for all its residents.

Both authors have extensive backgrounds in urban and regional policy issues and contribute frequently to public discourse on these vital areas. For further exploration of the challenges and potential solutions to Canada’s housing crisis, please refer to the comprehensive commentary linked above.