Robin Wiebe is a senior economist and Ted Mallett is director of economic forecasting at The Conference Board of Canada.
Homeownership is the cornerstone of the Canadian dream. It’s practically a Canadian birthright. Yet skyrocketing housing prices are threatening an entire generation’s housing aspirations, and governments at all levels need to be much more innovative in efforts to bring down housing costs.
Statistics Canada has released numbers showing a perfect storm of escalating fees, zoning restrictions and labour shortages constricting Canada’s supply of housing. Combined with massive population increases in communities like the Greater Toronto Area (GTA), housing prices have reached eye-watering levels. The average home price in June of this year in the GTA was $1.2-million. In Vancouver, it was $1.3-million. Between 2017 and 2022, Canada’s national average resale price jumped 39 per cent, its average new single-detached home price rose 21 per cent and the national average two-bedroom rent rose 27 per cent. These far exceeded the 16-per-cent increase in Canada’s consumer price index over the same period.
Housing supply measures were not at the top of government priority lists in the past and the results speak for themselves. Households are now bulging with multiple families sharing cramped accommodations or with kids unable to fly the nest. Vacant units alone could house almost three million people but notwithstanding the imposition of vacant unit taxes in numerous cities, vacant unit counts rose 6 per cent between 2017 and 2022 and made up 7.5 per cent of Canada’s housing stock in 2022. Densification and the aggressive push by governments to combat NIMBYism in areas where single-family homes dominate the local housing stock could produce a political firestorm. And while Ontario has opted to develop portions of the environmentally sensitive Greenbelt, which totals 800,000 hectares, fierce opposition from many may spur federal government intervention based on environmental grounds.
In many instances, governments have pursued contradictory policies that fail to address the crisis in a cohesive manner. The Ontario government announced an ambitious plan to build 1.5 million homes by 2031, while imposing new powers to override municipal zoning regulations. The B.C. government has not opened up land held in the Agricultural Land Reserve, which holds nearly 4.6 million hectares – a direct constraint on housing development that has contributed to price inflation and housing shortages.
The Statistics Canada data indicate relatively low additions to Canada’s stock of semi and row houses. Such units, frequently termed the “missing middle,” were once commonly built, but their construction has lagged. By 2022, almost 70 per cent of Canada’s rental stock was in “apartment and other” dwellings, with single-family homes making up only 20 per cent of this inventory. Ramping up delivery of single-family homes would be welcomed by many house-hunting families. But as noted, government policies are not typically aimed at encouraging this kind of housing. Rather, initiatives like Ontario’s More Homes Built Faster legislation and British Columbia’s Homes For People action plan will respectively allow three and four units on lots zoned for single-detached homes.
And initiatives like the B.C. government’s plan offering homeowners a $40,000 forgivable five-year loan to renovate a basement suite, while a step in the right direction, may help only slightly. This is because apartments already dominate markets like Vancouver’s and realistic potential additions to dwelling supply from such new units will be dwarfed by expected demand. Still, the proposal is a sign of the times. Canadians may not want to live in basement suites, but they might have to.
New housing supply, faster regulatory approval times and reduced red tape, combined with increased densification and the addition of greenfield land, are all levers that need to be deployed to ramp up supply to have even a hope of keeping pace with demand.
As it stands, urban planners, housing bureaucrats and some politicians often exhibit anti-suburban sentiment. This camp has long promoted higher density as the optimal housing solution. They like its use of existing municipal services, its promotion of environmentally friendly walking and transit use and its low cost per new unit compared to greenfield development. This may put them on a direct collision course with what consumers really want – the Canadian dream of a single detached home with a garage and a backyard in a leafy suburb.