The strategy to massively boost new housing construction across Canada is at the heart of the Liberal Government’s updated Housing Strategy, which was the focus of the 2022 budget. The spending plan envisions $ 4 billion to set up a Housing Acceleration Fund, a project still under development designed to help municipal governments accelerate new housing projects. Ottawa says the fund will help build the 3.5 million new homes it says Canada needs over the next 10 years. “The solution to affordable housing is to offer housing,” Housing Minister Ahmed Hussein told the House of Commons earlier this week. However, some observers say this approach is based on misinterpreted data and the tendency of politicians to oversimplify complex problems.
There is no evidence that more homes mean lower prices: expert
“[The government] “It seems to have accepted the offer that any offer is good if we flood the market with an offer that will lower prices,” said Steve Pomeroy, a researcher at the Canadian Housing Evidence Collaborative at McMaster University.
“I do not think there is any evidence that this will actually happen,” said Pomeroy, who described the under-supply argument as a “myth.”
Christine Whitehead, an associate professor at the London School of Economics, said identifying under-supply as the cause of high prices was “completely consistent” between governments around the world.
“An honest response to the affordability crisis is much more closely linked to macroeconomics,” said Christine Whitehead, an associate professor of housing economics at the London School of Economics. (The UK Collaborative Center for Housing Evidence)
Whitehead – who has said she has studied housing economics for “many decades” – said the narrow focus on accelerating new construction creates an attractive political move, but rarely causes prices to fall.
“Most normal people would think that a lot more housing would make things better,” he told CBC News.
“Just building 100,000 homes a year or 200,000 homes a year is not going to make that big a difference in housing prices on its own.”
Affordable housing has made Pierre Poilievre a central theme of his Conservative leadership campaign. He has also identified the lack of supply as the main culprit leading to rising prices.
The NDP has called for the construction of new homes, with the proviso that newly built homes should be intended for low-income families.
How many homes does Canada need?
The federal government, opposition parties and many economists have argued in recent years that Canada does not have enough housing for its people.
ONE Document 2021 from Scotiabank Canada has the fewest homes per 1,000 inhabitants of any G7 country, which the bank described as a “structural housing shortage”.
The 2022 budget includes a similar analysis showing that Canada is below the OECD average of 1,000 inhabitants per household – behind France, Japan and Germany, but ahead of Australia and New Zealand.
Pomeroy said statistics like these do not adequately support the government’s argument for under-supply, as other important factors are omitted – such as the fact that Canada has the second largest average household size in the G7.
He said the recent rise in new housing in Canada was keeping pace with population growth – even as housing prices hit new highs.
“When you look at the data, we do not support the idea that we have a shortage of supply, certainly nationally,” Pomeroy said.
Canada added more than 271,000 new homes in 2021, according to Details of Canada Mortgage and Housing Corporation.
The Minister for Housing and Diversity and Integration, Ahmed Hussen, has repeatedly said that the lack of supply is behind the affordable housing crisis in Canada. (Adrian Wyld / The Canadian Press)
Robert Kavcic, a senior economist at the Bank of Montreal, also questioned the government’s ability to stimulate more construction.
“The challenge here is that we are already seeing a record number of units under construction and the industry is pushing against labor and capacity constraints as they are,” he wrote in a response to the budget.
Kavcic also noted that if the government manages to speed up new construction, it could fail by raising material costs and worsening inflation, pushing house prices higher.
Ottawa says other factors are contributing to the high prices
In an email to CBC News, a spokesman for Hussen added a nuance to the government’s argument that insufficient supply has pushed up prices. “There are several factors that make housing more expensive, but the biggest issue is supply,” wrote Daniele Medlej. “However, we recognize that there are other factors at play, so we are implementing a number of measures to curb unfair practices in the housing market, including banning foreign home buyers, introducing a reversal tax and banning blind offers. . “ Whitehead said the government’s efforts to boost supply and change regulations are being undermined by macroeconomic forces such as income levels and interest rates. In addition to introducing politically toxic measures, such as capital gains or inheritance taxes, he said, the Canadian government will have minimal direct control over prices. “I wish I could be happier about it,” Whitehead said. “What I’m saying is that building houses does not hurt. You should continue to build houses and try to make them available to people in need.”
