Michael Lewis
Special to Ontario Construction News
A new report from Desjardins Group concludes Canada is unlikely to meet its goal of building 5.8 million new homes by 2030.
The report highlights challenges such as elevated interest rates, high material and labour costs, worker shortages, and lagging construction productivity, which are expected to lead to a decline in national housing starts this year, followed by a modest rebound in 2025-2026.
The decline includes a forecasted drop in rental apartment starts from a record high in 2023, driven by unfavourable financing conditions. Many of last year’s projects were financed before the recent rise in interest rates.
The Canada Mortgage and Housing Corporation (CMHC) predicts that total starts will likely not return to pre-pandemic levels in the foreseeable future, even if interest rates continue to fall. This is due to worker shortages exacerbated by a wave of retirements, pushing an already strained construction industry beyond its limits.
The report identifies the shortage of skilled workers as the main constraint on homebuilding. According to the Canadian Home Builders’ Association, the industry needs to nearly double its workforce to address the shortage of affordable housing.
Desjardins Group notes that because Canada’s immigration system does not prioritize attracting skilled tradespeople, a greater share of domestic resources will be needed to meet federal housing targets. Even if annual growth in construction employment were to increase to nearly 10 per cent by 2028, the construction job vacancy rate would still approach 10 per cent that year, requiring significant wage growth.
Federal and provincial governments have implemented measures to expand skills training and reduce regulatory and financing barriers to home construction. These include eliminating the HST, providing low-cost loans, and offering subsidized insurance for certain types of housing, particularly purpose-built rental apartments.
These efforts could increase housing starts to more than 300,000 by 2028, up from an estimated 256,000 this year and surpassing the previous record of 273,000 set in 1976, according to the report, “Start Me Up: Estimating the Impact of Recent Housing Supply Measures on Housing Starts in Canada,” by Desjardins economists Marc Desormeaux, Kari Norman, and Randall Bartlett.
However, the report warns that these numbers may be optimistic given what the Liberal government described in its spring budget as entrenched structural hurdles in the housing sector. The CMHC has indicated that even if targets are not met, regulatory changes and other measures could still alleviate the shortage of affordable housing.
The Desjardins report follows a BMO study from last year, which suggested that addressing the housing supply gap would require 3.5 million new housing units by 2030, or nearly 500,000 additional units per year, to restore affordability to 2004 levels. The BMO report noted that many barriers to housing construction remain systematic and have yet to be addressed by policymakers.
The report emphasizes the need for realistic targets and cautions against relying solely on a major push to build new homes to solve affordability issues. It also notes that technological innovations, such as modular construction and robotics, as well as increased investment in building solutions, could help address the affordable housing crisis.
Some municipalities, including Toronto, are relaxing restrictions on building density and allowing multiplex units in traditionally single-family zoned areas. These measures aim to create more affordable housing amid rising population and scarce development land.