There's a disconnect in the Canadian housing market. While the number of construction workers reached a record high in 2023, housing starts – the number of new homes under construction – fell short of expectations.
This is according to a report from the Canada Mortgage and Housing Corporation (CMHC). The report, titled "Housing Capacity in Canada," revealed a significant gap between the construction industry's potential and its actual output.
Key findings
- Record Number of Construction Workers: In 2023, there were approximately 650,000 construction workers in Canada.
- Housing Starts Fall Short: Despite the high number of workers, housing starts only totaled around 240,267 units.
- Untapped Potential: The CMHC estimates that with full utilization of the construction workforce, Canada could have built as many as 400,000 new homes in 2023.
The report highlights a crucial question: why aren't we building more homes despite having the manpower?
Possible Reasons for the Lag
- Structural Changes Needed: CMHC's Senior Vice-President of Housing Economics and Insights, Mathieu Laberge, suggests that reaching full housing production potential requires significant structural changes, not just short-term solutions.
- Municipal Regulations: Laberge points to potential adjustments at the municipal level, such as changes to regulations, that could help streamline the construction process.
- Limited Impact of Government Initiatives: The federal government has pledged billions for new construction and renovations, along with funding programs aimed at speeding up approvals. However, the CMHC report suggests these initiatives haven't had a significant impact yet.
Looking Ahead
While the national numbers show a shortfall, certain Canadian cities are performing better. For example, Calgary, Edmonton, and Vancouver have traditionally high housing start rates.
The report concludes that if all of Canada performed at the same level as these high-production cities, the country could have built an additional 430,000 housing units in 2023.
What Does This Mean for the Market?
The gap between housing supply and demand is a major factor contributing to rising housing prices in Canada. Efforts to address the structural challenges and streamline regulations could play a key role in increasing housing supply and achieving a more balanced market.
Coldwell Banker Horizon Realty is closely monitoring these developments. We are committed to keeping our clients informed about factors that may affect the real estate market. If you have any questions about buying or selling a home, we encourage you to contact us today.
