CMHC finds supply ‘the biggest issue affecting housing affordability’

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In some of Canada’s major cities, new construction is struggling to keep up with population growth

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03 May 202210 hours ago4 minutes read 6 comments Housing construction in Canada's major cities is not keeping pace with demand, says the Canada Mortgage and Housing Corporation. Housing construction in Canada’s major cities is not keeping pace with demand, says the Canada Mortgage and Housing Corporation. Photo by Tyler Anderson/National Post Files

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New construction in some of Canada’s major cities, particularly Toronto, is struggling to keep up with population growth, making affordability a “significant” challenge, according to the first in a series of reports from Canada Mortgage and Housing Corporation, to the better to get a grip on the country’s housing supply and its impact on affordability.

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“The biggest problem affecting housing affordability in Canada is that supply simply isn’t keeping up with demand,” the CMHC said in the report released Tuesday afternoon.

However, the housing authority added that the situation is complex and several factors are responsible for the steep, sustained price increases in recent years.

“CMHC is currently working to estimate the number of housing units needed in many parts of the country to make the housing market more affordable,” the housing authority said. “In addition to demographics, this analysis considers several economic factors, such as the impact of household income on housing demand.”

The next few years’ CHMC reports will focus on the country’s six largest metropolitan areas: Toronto, Montreal, Vancouver, Calgary, Edmonton and Ottawa. You will examine trends and perform analysis of factors including the relative growth in housing supply per capita over time, the intensity of development including units per structure and building height, and how much new living space is apartments and rents compared to single-family homes.

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In the first report, CMHC found that residential construction dominates in major urban centers like Montreal, Toronto and Vancouver, where restrictions such as land and bylaws are “significant” factors driving land price increases.

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“Toronto is winning in the construction of high-rise residential buildings with hundreds of units,” including rentals or condominiums, the CMHC said, noting that different building types have different construction times and costs, which in turn affects affordability.

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The situation is different in Calgary, Edmonton and Ottawa, where new supply of single-family, semi-detached and townhomes remains strong.

Calgary saw its strongest growth in housing starts in 2021, with a surge in single-family home and apartment construction that boosted housing starts by 63 percent year-over-year. Although some of the increase was due to slower construction activity in the first year of the pandemic, declining inventories and strong demand also played a role in the expansion, the CMHC report said.

Vancouver stood out as the only city where single-family home construction fell 2.3 percent last year. Overall new home construction in British Columbia’s largest city rose 16 percent.

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“This is an ongoing trend that has developed over the past decade because high land prices have largely made new single-family homes uneconomical,” the housing authority said.

Housing construction was also active in Montreal, which recorded the highest housing start rate in over three decades. The CMHC said prices (or rents) and demand had accelerated.

Toronto, Canada’s largest metro area, added the most housing units in absolute terms in 2021, up nine percent from the previous year. However, the CMHC noted that this does not mean most units relative to its population.

Toronto, Montreal and Ottawa generally have the lowest per capita housing construction rates, measured as housing starts per 10,000 people. But Toronto, unlike the other two cities, has shown a slight downward trend in this ratio in recent years, the CMHC report said.

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“This suggests that despite a high number of housing starts, there is insufficient construction to keep up with population growth,” the housing authority said, noting that this situation “certainly has not helped address the affordability issues” in Toronto and environment to reduce .

Both the federal and Ontario governments have included pledges to include housing affordability and construction in budgets presented last month.

Avery Shenfeld, chief economist at CIBC Capital Markets, said the CMHC report joins a “chorus of other studies that have identified a supply gap as a key driver of rising home prices.” And although remedial measures are in the works, such as B. Changes to zoning and permitting procedures, it will not be an easy solution.

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“In the short term, we are facing a shortage of skilled construction workers, which could limit our ability to increase the pace of construction,” Shenfeld said.

Ontario Home Builders’ Association president Bob Schickedanz said the new home construction industry faces challenges such as access to land, labor, infrastructure and supplies.

“The province expects that 2.27 million more people will call Ontario home over the next decade and there is an economic and social imperative that we have the resources and building permit system needed to accommodate to build at least one million homes over the next decade to meet this expected demand,” he said.

• Email: bshecter@postmedia.com | Twitter: BatPost

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