Canada’s housing crisis has many causes, the primary of which is that population growth from immigration and international student enrolment is growing faster than our system’s current capacity to produce housing. This scenario is not unusual in Canadian history: we experienced similar phenomena at the beginning of the 20th century, the return of veterans after the Second World War, and after the increase of immigration along with the first wave of baby boomers leaving their parents’ homes in the mid- to late 1960s. The federal government could solve this supply-demand disconnect through a demand-side approach by slowing the growth in permanent and non-permanent resident programs, such as international students. They could also solve it by addressing the bottlenecks limiting housing supply growth or combining the two. Both come with challenges and drawbacks.
We believe that demand-side approaches should be considered but a supply-side approach is necessary, and the federal government should adopt the Canada Mortgage and Housing Corporation’s (CMHC) call for 5.8 million homes to be built by the end of 2030 as a target. The target should recognize that various housing types are needed, from secondary suites in existing homes to the two million purpose-built rental units called for in the National Housing Accord.
The right type of units must be built, including deeply affordable housing and housing accessible for persons with disabilities. That housing must be resilient to extreme weather events induced by climate change and consider emissions from construction and land use changes to ensure our housing goals are compatible with our climate targets.
The first step in achieving that supply is identifying the barriers that prevent a rapid increase in housing supply. The Ontario-focused PLACE Centre report, Working Together to Build 1.5 Million Homes, identifies six bottlenecks limiting housing construction. The first five address both market and non-market housing, whereas the sixth recognizes that non-market housing construction faces a unique set of challenges:
- Co-ordination: No one actor in the system can ensure housing completions keep pace with population growth. All orders of government, the higher education sector, builders, developers and the non-profit sector all play a vital role.
- Ability: Building homes requires sufficient labour, materials, equipment, land, infrastructure and capital. Not having enough plumbers, enough bathtubs, or money to pay for plumbers or bathtubs will prevent the necessary quantities of homes from being built.
- Viability: Or, as developers ask, “Will it pencil?” For-profit builders and developers will not build unless it makes economic sense for them to do so.
- Productivity: There are some inputs to homebuilding where we may not be able to double or triple them quickly, such as specific types of skilled labour. Homebuilding needs to be more productive and innovative.
- Permission: The regulatory environment needs to allow housing to be built, with minimal delays, while producing them safely, protecting the environment and creating great communities.
- Non-market housing: There are housing needs the market simply cannot meet. The limitations of the market create the need for governments and not-for-profits to build everything from supportive housing units to student residences and do so in sufficient quantities.
Co-ordination is essential. The federal government needs to take leadership and work with the other two orders of government and work with builders, developers and the higher education system to co-design a system to build more homes.
The National Housing Accord, co-developed by the Canadian Alliance to End Homelessness, REALPAC, the PLACE Centre, and other housing experts provides a 10-point plan for the federal government to address these bottlenecks. For example, one recommendation calls on the federal government to develop a national workforce and immigration strategy on housing to increase the sector’s ability to build homes.
The viability of homebuilding can be increased by reforming CMHC fees and the federal tax system and eliminating the HST on purpose-built rental housing to incentivize its construction. Accelerated capital-cost allowance provisions, used in the 1960s to rapidly increase apartment buildings, should be reintroduced. Low-cost, long-term fixed-rate financing programs can help increase apartment building and help upgrade existing purpose-built rentals to make them more accessible, climate-friendly and energy-efficient.
Building 5.8 million homes will only be possible through substantial increases in productivity and innovation. The accord recommends the federal government should help develop a robust innovation strategy for housing, including a catalogue of CMHC pre-approved housing designs. This approach was quite effective after the Second World War. It also advises that the National Building Code be altered to drive innovation in the home-building sector.
Ottawa must take leadership and work with the other two orders of government and builders, developers and the higher education system to co-design a system to build more homes, writes @MikePMoffatt #onpoli #housing #cdnpoli
Fixing the permissions system is vital, and the report calls on several reforms to the CMHC approvals process. To increase the supply of non-market housing, the federal government can create property acquisition programs for non-profit housing providers to help purchase new or existing rental housing projects and hotels and facilitate office-to-residential conversions.
The federal government has the policy tools needed to increase the housing supply. It simply needs to use them.
Dr. Mike Moffatt is the founding director of the PLACE Centre at the Smart Prosperity Institute. In 2017, Mike was the Chief Innovation Fellow for the Government of Canada.