The builders' group is calling for immediate action
The Canadian Home Builders’ Association (CHBA) has called on the federal government to implement policies that would counteract the negative effects of rising interest rates on housing access and the construction of more supply.
In particular, the higher costs stemming from elevated borrowing rates would have a prolonged undesirable impact on home prices.
These would then go on to aggravate the supply-demand imbalance already prevalent in a lot of markets, further eroding affordability, the group warned.
“Higher interest rates mean it is less affordable to finance housing, either to own or rent, which in turn means there will be less housing units of all types built,” CHBA said. “This is affecting affordability and availability for home buyers and renters alike.”
Policy interventions are needed as soon as possible, since the government has previously stated that the pace of construction will essentially need to double to build approximately 5.8 million new homes over the next decade, just to address the current housing supply and affordability crisis.
“With these high interest rates, we need policy adjustments that will support home buyers and purpose-built rental construction now, to avoid any more slowdowns in the creation of housing supply; and we will still need them after interest rates return to more normal levels if we are to truly pursue addressing the housing supply shortage,” said CHBA CEO Kevin Lee.
One solution lies in making it easier for first-time buyers to enter home ownership, which will likely stimulate more supply.
“A return to 30-year amortizations on insured mortgages for well-qualified first-time buyers would be a perfect tool to address the challenges Canadians are facing and to get more housing built,” Lee suggested. “We can’t just state ‘we need more houses’ without policy change to support that, otherwise it simply won’t happen.”
The federal government could also invest more in housing-enabling infrastructure, which will help accelerate more development.
“It will take a comprehensive approach to solve Canada’s housing supply and affordability crisis; an approach that supports new homebuyers’ ability to access the market, enables investment in purpose-built rental, avoids adding new costs to housing of all types, and removes barriers to more housing supply that is desperately needed,” Lee said.
