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Thursday’s federal budget estimated that the country needs 3.5 million new homes by 2031 to house a growing population.DARRYL DYCK/The Canadian Press

Home builders are warning that Ottawa’s new $4-billion fund to help municipalities move faster on new home approvals faces significant hurdles in speeding up the pace of construction in Canada.

Thursday’s federal budget estimated that the country needs 3.5 million new homes by 2031 to house a growing population. That would require housing starts to double from an annual average of around 200,000 units to nearly 400,000.

A key measure in Thursday’s budget aimed at helping reach that target is the Housing Accelerator Fund, which is supposed to help spur construction of 100,000 new homes over five years by providing financial rewards to cities that can quickly build homes.

“It sounds wonderful. Is it gonna work? I doubt it,” said Scott McLellan, a senior vice-president with Plazacorp, which is building condos in the Toronto region.

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Under the program, municipalities would be eligible for payments from Ottawa if they increase the pace of approvals for new home construction.

Mr. McLellan said he does not know if throwing more money at the development process will address the problem of local councillors supporting pushback from local residents who want to halt approvals when condo buildings and other multiresidential homes are slated for their neighbourhood.

The budget did not provide much detail on how the housing accelerator fund would work except to say that it could include an “annual per door incentive,” for cities, as well as funding for planners and other ways to speed up development.

The federal government does not directly control home-building approvals so the program can only work with co-operation from municipalities, which will only be eligible for funding if they sign on and agree to the financing terms.

“Certainly, if they don’t get on board, it’s not going to happen,” said Kevin Lee, chief executive of Canadian Home Builders’ Association, a lobby group that represents 9,000 home-building entities including trade contractors and insurers.

The budget attempts to tie public transportation funding to new home construction, which Mr. Lee said could provide another incentive for some municipalities to participate. It is not known if Toronto or any of the cities in southern Ontario with desperate housing needs will comply.

Even if the new fund can succeed in speeding development approvals, the construction industry says it will be hard to double the pace of home building because of an industry-wide shortage of construction workers and other tradespeople.

“We have some real challenges with labour availability and so it’s going to be a challenge to find all the workers,” said Sean Strickland, executive director with Canada’s Building Trades Unions, which represents 600,000 construction workers across the country.

Mr. Strickland said the labour shortage has been exacerbated by the combination of older tradespeople retiring as new home construction and other commercial real estate building soars.

The budget also proposes to make it easier for construction workers to travel for new projects in the country by providing a tax deduction of up to $4,000 a year in relocation expenses. That would be effective for the 2022 tax year.

Mr. Strickland that will help immediately, since developers do not typically compensate workers for relocation and historically tradespeople have not been allowed to deduct their moving expenses. Other measures to attract and train more workers will take more time.

And even with the push to hire and train more construction workers, there is a lack of building materials. The pandemic slowed the movement of goods around the world, leading to all types of shortages and production delays. Global supply chains have been further disrupted by Russia’s invasion of Ukraine.

“That will be a logistical challenge for the industry,” Plazacorp’s Mr. McLellan said.

Not only have home prices skyrocketed during the pandemic, apartment rental vacancies have dropped. The vacancy rate was close to 1 per cent in Halifax, Gatineau, Kingston and Victoria last fall, according to the most recent government data.

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