How many homes can Canada build?

Canada is leaving massive homebuilding potential on the table despite labour shortages being a major barrier, according to Canada Mortgage and Housing Corporation (CMHC).

CMHC has released a report analyzing Canada’s capacity to build 3.87 million new homes by 2031, as outlined in Canada’s Housing Plan and the 2024 Federal Budget. This goal has raised questions about whether the country has the resources and capability to meet this ambitious target.

However, CMHC's analysis shows that with the existing residential construction workforce of around 650,000 workers, Canada should be building between 130,000 and 225,000 more homes per year than it currently is.

"Reaching this full potential will require structural changes that go far beyond the short term," the report read. "There are adjustments occurring across the country right now that may help get us closer to this goal, such as changes to regulations at the municipal level. That said, more can and must be done by governments and the industry to achieve greater housing outcomes."

Housing starts in 2023 totalled only 240,267 units, far below Canada's estimated potential of over 400,000 new homes annually with current resources.

"Roughly speaking, Canada's potential annual housing production could exceed 400,000 new homes," CMHC said.

The crown agency pointed to historical periods between 1999 and 2004 when labour productivity in residential construction was much higher, requiring fewer workers per housing start.

The analysis also examined housing start ratios relative to population across different cities. If national construction activity had matched the highest-performing markets like Calgary, Edmonton and Vancouver, the new housing supply in 2023 could have reached nearly 430,000 units.

"The discrepancy in housing starts production relative to population across Canadian cities hints that regulation plays a significant role in whether building activity can accelerate — especially municipal regulation," the report noted.

It cites factors like permit delays, restrictions on building heights and densities, and development charges as regulatory constraints that municipalities need to address.

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While all levels of government have taken steps, including the federal Housing Accelerator Fund, to incentivize municipal reforms, CMHC argued that more systemic changes are also needed across the housing industry.

"For years, the residential construction industry pointed to regulation as the most significant constraint to building more houses," the report said. "Evidence shows that progress can indeed be made on that front, and all levels of government are adapting, but more must be done."

The report calls for a "broad mobilization" involving employers, trade unions, and workers to increase productivity and scale up housing development, provided there is greater regulatory flexibility.

"A significant dialogue needs to occur on what employers, trade unions and employees in the residential construction industry are ready to contribute in terms of scaling up housing starts and getting Canada to its full potential, in exchange for greater regulatory flexibility," CMHC said.

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