Increasing Housing Supply

Canadian governments have to stop pouring money into the dream of the white picket fence and purchaser incentives. Demand is not the problem. Collectively, the focus has to be on increasing housing supply. Solve the supply problem – solve the affordability problem.

Some Statistics

• The Parliamentary Budget Office estimates that Canada must build 426,000 new homes each year between now and 2030 to close the gap between supply and demand
• CMHC sets 3.5 million additional residences as the number required over that same period to re-establish some level of affordability.
• In November 2023, the Office of the Federal Housing Advocate asserted that Canada needs an additional of 4.4 million permanently affordable and accessible homes to restore affordability to the housing system.
• Average new home deliveries each year – 2019 to 2023: 62,000
• More promising: 68,639 new home deliveries in the first half of 2024.
• Federal and Provincial combined debt to GDP 106.4% ; total combined debt has gone up $1.0 trillion over the past 17-years.
  

So What to do?

Based on current housing production, home shortages will only get worse. Even if new home production reaches 136,000 for all of 2024, a record number, it remains short of needed annual supply by 290,000 units. While true that four other G7 countries have higher gross debt to GDP ratios than Canada, I do not think that Canada’s governments have the required financial flexibility to solve the issue with money. So what to do?

I will suggest some answers to this question in a number of posts, first up:

It always starts with land!

No land, no buildings! So, who owns the most land? Federal, provincial, and municipal governments, much of which lies dormant. So, make some – maybe a lot – of it available for residential development through sale or long term land lease. Worried about affordability? Skew the purchase price or land rent to favour projects that commit to affordable rents. The deeper the affordability, the deeper the price discount!

The Impact:

• A dramatic increase in land supply should at least stall speculative increases in land values in general
• A tangible government contribution to housing supply that does not entail any program spending but ….
• Conversely, generates revenues from land sale proceeds or land rent
• Enabled new development generates municipal revenues – permits, development charges, real estate taxes

Beware of:

• Government bureaucracy equals slow progress
• Expensive processes erode financial benefits
• Overly precise definitions of target communities can prevent addressing the broader issue – the housing shortage

Increasing Housing Supply – More to Come

I will tackle densification, zoning, and land use in my next post on creating more homes for more people. And then needed infrastructure, development approval processes, building codes and new building technologies.