Cory Morgan: If Canada Is to Catch Up on Rapidly Growing Housing Shortage, Government Needs to Get Out of the Way

A construction worker works from a lift at a new housing development in Ottawa on Oct. 14, 2022. (Sean Kilpatrick/The Canadian Press)

Commentary

Canada’s housing affordability challenges are about to get a whole lot worse soon. While the Canadian government has set immigration targets at 500,000 people per year, anticipated new home construction is expected to fall short of national needs by 100,000. Governments at all levels need to address this issue before it becomes a full-blown crisis. Unfortunately, governments aren’t typically inclined to turn on a dime with policies, especially when ideology is at play.

There is no avoiding the reality of the issue. Canada needs to increase its housing supply. It doesn’t matter how many rental subsidy programs are created, if the nation has more people than homes, people will find themselves unhoused. That’s not a matter of opinion. That’s basic math.

While the federal government has committed to several initiatives to increase the amount of affordable housing in Canada, the homes aren’t being built. For example, billions of tax dollars were set aside for the Rapid Housing Initiative in 2020 for the purpose of speeding construction in communities in need. Over 10,000 applications for the subsidy were approved. As of the end of last November though, only 1,449 units were built. The National Housing Strategy has committed $82 billion to expand home construction but there is little evidence to indicate it’s working.

If Canada wants to catch up on the rapidly growing housing shortage, it doesn’t need more government programs. What it needs is for governments to get out of the way.

Home builders are more than eager to expand the construction of units, but onerous government regulations are handicapping them and adding to the cost of units.

Canada’s net-zero emissions strategy with its National Energy code will add an average of $40,000 to the price of a 2,000 square-foot home in Calgary, according to Shane Wenzel of Shane Homes in Calgary. That number balloons to as much as $60,000 on the consumer once mortgage interest is taken into consideration. The increasingly complicated energy regulations also limit the number of contractors able to work on new homes and limit the supplies that can be used. While energy-efficient homes can lead to savings on utility bills, how long does it take to recoup $60,000? Housing construction targets clash with net-zero requirements, and the government is going to have to figure out which one it wants to meet.

The prospect of new, intrusive rental housing regulation puts a chill on investment into new units. In a report written for the Office of the Federal Housing Advocate, recommendations were made that would kill the private rental market if they were implemented. The report literally calls for the expropriation of rental property from companies that “violate human rights.” It should be noted that this group considers rent increases or renovations that lead to rental increases to be human rights violations. They also call for the government to force banks to pull financing from private rental companies and force provinces to implement rent controls.

The report is ludicrous, and it’s unlikely the government will implement the recommendations. That said, the government hasn’t condemned the report either. Large rental properties need tens of millions of dollars in investment to construct. How many companies are willing to risk that kind of capital when the government entertains notions such as the one in the report that may lead to the seizure of their property? The government must publicly condemn the report’s recommendations and stop commissioning them if they want to regain the trust of investors.

Red tape at the municipal level of government is hopelessly delaying new home construction and increasing costs. In Calgary, it takes eight years and millions of dollars in permit fees and studies for a new development to go from concept to construction. The timelines and costs are similar in other jurisdictions as ideologically driven city councils obsessed with high-density urban development try to hinder outward city growth.

Regulations banning or strictly controlling the use of secondary suites in homes also hinder the expansion of rental spaces. Easing such restrictions could add thousands of units to every city in short order while providing valuable rental income to homeowners. Such moves can garner opposition from established urban voters, so councils often dodge the issue.

Municipalities rely on high real-estate prices for property tax revenue. It disincentivizes local governments from adding housing supply which may slow the rise in property prices. Rethinking revenue sources could ease that dependency.

The affordable housing crunch in Canada is set to go from bad to worse. Canada has the means to expand the housing supply, but governments need to find the will to allow it. They need to fight their instinct to regulate and control, and let the market work as it should.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.