Canada’s national housing agency is scaling back its ambitions on improving Canadians' ability to buy a home, warning that even a dramatic increase in home construction will do little to return affordability to levels seen two decades ago.
In a new report released Thursday, Canada Mortgage and Housing Corporation (CMHC) said that boosting annual homebuilding to as many as 480,000 units by 2035 would only bring affordability back to where it was just before the COVID-19 pandemic.
“Restoring affordability to levels last seen two decades ago isn’t realistic, especially after the post-pandemic price surge,” CMHC said.
The agency now projects that doubling the current construction pace, which stands at about 250,000 units per year, would reduce the share of income needed to cover the cost of a typical home with a mortgage from 54% last year to 41% by 2035.
However, that’s still far above the affordability seen in 2004, a benchmark the agency is now abandoning.
The change in forecast “highlights how widespread the housing affordability challenge has become across Canada,” CMHC added.
Earlier CMHC forecasts had been more optimistic, suggesting that a rapid expansion in housing supply could push affordability back to 2004 levels by 2030. But the agency now says this is no longer feasible, pointing to the lingering effects of the recent homebuying frenzy, low interest rates in 2020 and 2021, and the country’s rapid population growth after pandemic restrictions eased – all of which sent prices soaring across many cities and regions.
Montreal faces the nation’s widest housing supply gap, with affordability set to worsen unless additional supply is brought online. Toronto, Canada’s largest city, would need to boost annual homebuilding by 70% to see any meaningful improvement in affordability.
“For many years, housing prices and rents in Vancouver and Toronto attracted attention from all over the world,” the report notes. “Over time, these increases came to burden many Canadians and their children. Low-income and some middle-class households struggle to even find a place to live, let alone at a price they can afford.”
The revised outlook also takes into account the often-lengthy rezoning processes that can delay construction projects for years. These projections aren’t official government targets, CMHC clarified, but estimates of the scale of the problem.
Still, Prime Minister Mark Carney, elected in April, campaigned on promises to eventually ramp up homebuilding to 500,000 homes per year.
Despite these political pledges, most economists surveyed by Bloomberg expect housing starts to average just 230,000 units annually between 2025 and 2027, as high interest rates and economic uncertainty continue to put pressure on the construction sector.
CMP
No comments:
Post a Comment