Market IntelligenceEconomy

What You Need to Know About CMHC's Housing Affordability Report

 

Jul 06, 2022

Written by 

Ryan Berlin

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British Columbia needs to almost triple its annual average number of housing starts from the past five years in order to fully meet the housing needs of new and existing residents by 2030.

The Canada Mortgage & Housing Corporation (CMHC), a federal crown corporation and Canada’s national housing agency, “helps Canadians meet their housing needs, champions research, and advises on the housing industry”. 

This rennie brief summarizes and puts into context select findings from CMHC’s most recent report, titled “Canada’s Housing Supply Shortages: Estimating what is needed to solve Canada’s housing affordability crisis by 2030”. 

Some Background

A lack of affordable housing can have wide-ranging ramifications, including imposing inter-generational challenges (related to children being unable to afford a place to live as they transition into adulthood) and limiting the mobility of labour (and skills), which can serve to, in turn, constrain economic growth. 

Previous CMHC research has identified the drivers of home price increases, including demographic change, income growth, and the long-term decline in interest rates. With housing supply having been slow to respond to the growing demand for homes over time, this most recent CMHC report quantifies how much more housing supply is needed, beyond what current trends 

What We Need to Do to Achieve AffordabilityNationally, the report concludes that Canada needs 3.5 million additional homes to be built—beyond the 2.3 million that are already expected to be added—between 2021 and 2030. 

It’s worthwhile to consider that the 3.5 million additional homes translate to an average of 389,000 additions annually by 2030— this being in addition to the 256,000 homes expected to be built annually as part of CMHC’s current-trends forecast. For context, Canada started construction on almost 245,000 homes in 2021, which was an all-time high; looking back little bit further, Canada started an average of 209,000 homes annually over the past five years (2017 through 2021). As such, the combined 645,000 annual additions required nationally to achieve affordability by 2030 would represent a more than tripling (a 209% increase, to be precise) of what we averaged over the past five years, which also happens to be the most housing additions Canada has made in any five-year period in our history. 

The magnitude of the challenge in British Columbia doesn’t appear to be much different from that at the national level. Specifically, CMHC concludes that BC would need to add 570,000 homes— again, above and beyond the trend expectation of 423,000 homes being added—by 2030. This would mean building more than 110,000 new homes each year between 2021 and 2030, which would be 174% more than we added over the past five years (40,000 annually), and 155% more than the all-time high we achieved in 2021 of 43,000. 

Given the current economic, demographic, and political landscapes, these targets are clearly more aspirational than they are realistic. 

Next Steps

This latest report from CMHC focuses on the national and provincial landscapes of housing affordability and does not address the situation within regional housing markets, where concerns about housing affordability are arguably the greatest (such as in Metro Vancouver). While replicating this research at the regional level would be welcomed, the report itself notes that “we need to take drastic measures now to produce more housing—not more reports.” Cheeky, yes, but true. 

While achieving these targets by 2030 is about as likely as the Canucks winning the Stanley Cup this upcoming season, governments and developers must continue to work closely together to create conditions that are as favourable as possible to enabling the realization of new housing supply. 

This could include, but would not be limited to: speeding up development approval timelines; permitting additional density; subsidizing housing for lower-income households; providing tax and financing incentives to encourage the construction of specific housing types, such as rental; identifying and attracting migrants with the required skill sets to build new housing; and better-utilizing un-, or under-, developed land. 

Our rennie intelligence team comprises our in-house demographer, senior economist, and market analysts. Together, they empower individuals, organizations, and institutions with data-driven market insight and analysis. Experts in urban land economics, community planning, shifting demographics, and real estate trends, their strategic research supports a comprehensive advisory service offering and forms the basis of frequent reports and public presentations. Their thoughtful and objective approach truly embodies the core values of rennie.

Written by

Ryan Berlin

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