Canada in Short Supply of Housing; Industry Calls for Cuts to Taxes, Fees

Mountains loom behind homes under construction in Canmore, Alta., on April 24, 2023. (Jeff McIntosh/The Canadian Press)

Federal housing minister Ahmed Hussen told a House of Commons committee that the country needs more houses urgently.

“We need more housing supply in Canada,” he told the Public Accounts Committee on May 18. “We have the fastest-growing population in the G7. We have a very low housing supply of all types.”

According to Blacklock’s Reporter, home builders and analysts have asked the government for tax cuts and a reduction in mandatory charges on new home construction to boost supply.

A Canada Mortgage and Housing Corporation (CMHC) report from June 23, 2022, estimated that the rates of building will leave the country with a shortage of some 3,500,000 new homes by 2030, which amounts to more than 440,000 homes a year. New construction is only building an average of around 200,000 new homes per year, less than half of what’s required to meet the demand.

“We need more supply,” Hussen reiterated.

Nadine Leblanc, CMHC’s senior vice-president of policy, told the committee that 95 percent of the housing in Canada is built by the private sector. “When we talk about this target, collectively we need to build together,” she said.

According to the CMHC report, titled “Canada’s Housing Supply Shortages: Estimating What Is Needed to Solve Canada’s Housing Affordability Crisis by 2030,” “On current trends the housing stock increases from about 16 million in 2019 to over 18.6 million by 2030 for Canada.”

However, the report states that over 22 million units are projected to be required to “achieve affordability.”

“The private sector will be critical in addressing this supply shortfall,” wrote the analysts. “For their part governments can help by ensuring the regulatory process is as efficient as possible.”

Houses under construction in Toronto in a file photo. Toronto and Vancouver typically have the two least affordable housing markets in Canada. (The Canadian Press/Graeme Roy)

The Canadian Home Builders’ Association submitted a report on May 18 to the House of Commons Finance Committee that called for cuts to taxes and charges on new home construction.

“Governments need to stop adding costs to homes and instead need to do their part,” said Kevin Lee, CEO of the association.

“We are in a construction slowdown thanks to the interest rate increases of last year,” he said.

“As they rose, sales slowed to a trickle. As a result our Housing Market Index now suggests we could see as much as a 30 percent drop in housing starts, which corresponds to other data we are collecting, like 23 percent of our members cancelling projects and some 59 percent expecting to build fewer homes this year. This is the opposite of what is needed,” said Lee.

Paul Sullivan, a British Columbia analyst from Ryan ULC, recently released calculations that indicate government taxes and fees are contributing to very high housing prices.

The cost of a $1.1 million condominium in Vancouver now includes $327,565 in mandatory charges, fees, permit costs, and taxes by federal, provincial, and municipal regulators, Sullivan estimated.

“Despite rental vacancy rates that are chronically around 1 percent or less—a healthy vacancy rate is at least 3 percent—builders and renters see no relief on new taxes, fees, or policies that deter rental investments,” said Sullivan.