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Construction starts are well below the pace required to achieve the Ottawa target
Published May 16, 2024 • 2 minutes reading time
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In Canada, only 240,267 new homes were built, fewer than the 400,000 that could have been built if builders had operated at full capacity. Photo by Gavin Young/Postmedia
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The number of construction workers in Canada hit a record high in 2023, but housing production has failed to keep up, falling well short of its potential output, according to a report by the Canada Mortgage and Housing Corporation.
The agency's housing capacity report shows that around 650,000 workers were employed in the construction industry last year, but only 240,267 new homes were built, fewer than the 400,000 homes that could have been built if workers had been working at full capacity.
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The country's untapped potential in housing construction was determined by comparing actual housing starts with the industry's maximum capacity, the agency said. This method, similar to economic performance analysis, assesses Canada's efficiency in making the best use of its construction resources.
The number of construction starts was well below the pace required to achieve the federal government's target of 3.87 million new homes by 2031.
Mathieu Laberge, CMHC's senior vice president of housing economics and insights, noted that despite the record number of construction workers, the industry has not seen a proportional increase in construction activity. CMHC says historically, fewer workers have been required per housing unit, indicating higher productivity levels. Reaching Canada's full housing potential also requires significant structural changes.
“Realizing this full potential will require structural changes that go far beyond short-term development,” said Laberge. “There are adjustments currently underway across the country that could help us move closer to this goal, such as changes to regulations at the municipal level.”
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The federal government has committed billions of dollars to new construction and renovations. It has also launched a program to fund regulatory changes at the municipal level to accelerate housing construction. Currently, 179 municipalities have agreements with the Housing Accelerator Fund. In addition, additional funding was provided earlier this year through the Canada Housing Plan, but none of these initiatives has had a significant impact.
Historically, the number of housing starts has been closely linked to employment and gross domestic product. However, in the mid-2000s, this link began to break down. Despite increased investment in housing, the pace of construction has not kept pace with the growth in funds provided.
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Nevertheless, certain Canadian Census Metropolitan Areas (CMAs) have outperformed others in this regard. For example, Calgary recorded 11.73 housing starts per 1,000 residents, Edmonton 8.38 housing starts per 1,000 residents, and Vancouver 11.35 housing starts per 1,000 residents in 2023, highlighting their traditionally higher housing starts rates.
“If all of Canada had the same rate as these cities, the country could have had about 430,000 more new housing units last year,” the report said.
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