The housing crisis in Canada will soon reach “even more alarming levels” if the government and other stakeholders don’t increase construction to meet demand, according to a new RBC Economics report.
Housing construction needs to increase by nearly 50 percent if Canada has any hope of keeping up with future demographic growth, said RBC assistant chief economist Robert Hogue.
“Solving Canada’s housing crisis is a massive undertaking,” Mr. Hogue wrote in the newly released report. “It will take time and tremendous resolve by governments, industry, communities, and other stakeholders to reset the path we’ve been on for decades and address the policy missteps that caused house prices and rent to skyrocket.”
If building alone was relied on to meet future demand, yearly housing completions would need to rise from the current three-year average of 218,000–320,000 between now and 2030, the report noted. It added that higher deliveries would need to happen soon to meet the expected peak population growth in 2023–24.
The RBC recommendation comes a week after the Canada Mortgage and Housing Corporation said it expects to see housing starts decline this year due to higher interest rates. Its report predicted 224,485 housing starts in 2024.
While the RBC report identified high interest rates as an ongoing affordability issue, it is not the only reason for fewer new builds. The report pointed to the construction industry’s “capacity issue,” noting that the level of housing construction required “is far above anything ever achieved in Canada.”
An aging workforce and an inability to attract and retain workers are ongoing issues in the industry, the report noted. One in five construction workers are either at retirement age or will reach that age within the next 10 years. That means 330,000 workers will need to be replaced over the next decade.
“Builders already struggle to attract and retain workers. The job vacancy rate in the construction sector is among the highest across Canadian industries,” the report stated.
Seven Solutions
“Multi-pronged action” is needed to address Canada’s housing needs, Mr. Hogue noted in the report, offering seven solutions to fix the current crisis.Aggressively expanding the construction sector’s labour pool, he said, will mean realigning the country’s immigration system to place priority on newcomers with construction skills.
Canada’s recent immigrants are under-represented in the construction labour force, he said. Only 2.4 percent of landed immigrants between 2016 and 2021 held apprenticeship and non-apprenticable trades certificates, compared to 9.8 percent during the 1980s.
He also recommended the expansion of the Federal Skilled Trades Program by allocating more points to qualified candidates based on labour market needs and fast-tracking candidates endorsed by employers.
“Provinces should do the same in nominee programs,” he wrote. “The federal immigration department should maintain a dialogue with the construction industry to ensure immigration programs address structural shortages in skilled trades.”
Developing and adopting innovative designs, building techniques and technology is also essential to increase the number of homes produced per worker, the report noted.
“This won’t be easy,” Mr. Hogue said. “The construction industry has a lacklustre track record on productivity. There are more residential construction workers per housing completion today than there were two decades ago. This trend must reverse.”
Lowering the cost of building new housing is also essential to expand housing stock at prices people can afford, the report advised.
New home-building costs have soared thanks to the inflated price of materials and, together with labour, represent half of the cost of new builds. Government charges often account for more than 20 percent of the cost and the remainder is taken up by land.
“Efforts should be dedicated to lower or at least contain every cost item,” Mr. Hogue said.
Wider adoption of prefabricated housing, speeding up project approval timelines, easing zoning regulations, and accelerating construction of social housing stock were also mentioned in the report as ways to increase home construction.
“Time is running out,” Mr. Hogue wrote. “More progress is needed and fast. Canada must grow its housing stock like never before, especially at the affordable end of the spectrum in rental and social housing. Improving Canadians’ quality of life will depend on bringing about significant home and rent price relief.”
The average Canadian household needed to spend 63.5 percent of its income in the fourth quarter of 2023 to cover the costs of owning a typical market-price home, he said, adding that not much change is expected until 2025.
