The Federal Government’s Big Hairy Audacious Goal (BHAG) to Double the Number of New Homes Built.

TL; DR The federal government has set a target to double the number of housing units built over the next decade — an increase from 1.9 to 3.8 million. This recognizes the scale of our supply shortages, however, a simple number of units target is far too coarse to be meaningful. What gets built, and where it gets built matters a lot. And there is simply no way we will hit this target under the current policy mix from all three levels of government.

The Foreward to the federal government’s Budget 2022, titled A Plan to Grow Our Economy and Make Life More Affordable contains this big hairy audacious goal:

Over the next ten years, we will double the number of new homes we build. This must become a great national effort, and it will demand a new spirit of collaboration — provinces and territories; cities and towns; the private sector and non-profits all working together with us to build the homes that Canadians need.

In case you thought this was simply an aspirational statement, not to be taken literally, Chapter 1, titled Making Housing More Affordable, contains this section:

To fill the gap that already exists — and to keep up with our growing population over the next decade — Finance Canada and the Canada Mortgage and Housing Corporation estimate that Canada will need to build at least 3.5 million new homes by 2031. To reach that number, significant steps have to be taken today.

In a given year, Canada constructs about 200,000 new housing units — standalone houses, individual condos, and other types of homes alike. While annual construction has increased in recent years, it is not enough to address affordability challenges and keep up with the housing demands of a growing population. To meet these housing needs, Canada will need to double our current rate of new construction over the next decade.

I have a three-part reaction to this:

  1. The federal government is signalling that they recognize that we have a housing supply problem and they recognize the magnitude of the problem. This is a good thing!
  2. A simple number of units target is far too coarse to be meaningful. What gets built, and where it gets built matters a lot.
  3. There is simply no way we will hit the new federal housing target under the current policy mix from all three levels of government.

Let’s begin at the number of units. The 200,000 figure by the federal government is accurate; between 2012 and 2021, Canada built an average of 192,923 units a year. Doubling this figure over the next decade would require us to go from 1.93 million units to 3.86 million units constructed in a decade. Given that the CMHC states we need at least 3.5 million new homes by 2031, a target of 3.86 million homes seems sensible.

Below is the number of units completed in Canada, by year, going back to 1955.

At first glance, this would not appear to show any kind of supply shortage — we’re building roughly the same number of housing units in Canada as we always have. However, simply looking at the number of units omits two key details.

First, the population of adults, particularly those over the age of 25, has risen due to increased immigration and an international student boom.

And second, and probably more importantly, what gets built in Canada has changed dramatically over time. Canada is building far fewer family-sized homes, and far more bachelor and one-bedroom condos.

Unlike in the 1960s and 1970s, when high numbers of 2–4 bedroom apartments were being built, most of today’s “apartments” are tiny condos. We know this anecdotally; I’m looking for hard data on this. If you know of any, please send it my way.

Census 2016 reveals that the average semi-detached home houses 2.7 persons, while an apartment unit housed in a duplex houses 1.8 residents (and my guess would be that recently built ones house fewer). In short, we can’t simply treat all units as the same, as they have very different capacities to house families. The real risk the federal government runs is they try to hit their units target through the construction of more bachelor condos (which does little to address the shortage of places to raise a family with children) or through exurban sprawl (which is environmentally harmful).

In short, what you build and where you build it matters. It’s not simply about the number of units.

But if we want to talk about the number of units — what would it take to hit 3.86 million units? Last year, Canada completed 223,023 units, our most since 1979. We would need to increase this figure by 9.75%, every year, for the next decade, to hit the federal target.

Below, we see what that would look like in practice. It’s a massive change from the status quo.

Even the less ambitious 3.5 million housing unit target would require 8% compounded growth. There have been some years where we’ve seen housing unit completions rise by 8% or more over the previous year, including last year, as shown below:

But to do it year-in, year-out every year for a decade? That will take a whole lot of work given all the bottlenecks to growth including, but not limited to, regulatory, labour, and materials. And I haven’t seen anything from either the provincial or federal governments that would get us anywhere near these figures.

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Mike Moffatt

Senior Director, Smart Prosperity. Assistant Prof, Ivey Business School. Exhausted but happy Dad of 2 wonderful kids with autism. I used to do other stuff.