New Construction Remains Essential to Solve Canada’s Housing Crisis
The head of Canada’s national housing agency says the housing-supply crisis is not over and new construction is still needed, but that a market imbalance has created an oversupply in some sectors, including the nearly collapsed condo market in Toronto and Vancouver.
Canada Mortgage and Housing Corp. chief executive officer Coleen Volk said the sharp drop in sales of new-build houses and condos in recent years is not an indicator that policy makers have encouraged enough housing construction to fix the national housing crisis.
“There’s a lot of talk about maybe we’ve manufactured a soft landing for the housing market, and everything’s fine, and there’s no more supply shortage – and that’s not our belief,” she told The Globe and Mail’s Editorial Board Monday.
“We believe there’s a market imbalance in some sectors, but overall, we’re still short. We still need more housing. We need the right housing.”
Ms. Volk said there is an oversupply of condos in Toronto and Vancouver, and of high-priced luxury rental apartments, but there is still a need for more affordable middle-class housing. She said apartment vacancy rates remain tight on a historic basis.
The CEO added that there is still pent-up demand from middle-class Canadians who would like to buy homes, including new immigrants and young people living with their parents.
Since 2017, CMHC has been administering the federal government’s National Housing Strategy, which is aimed at bolstering the country’s housing supply and to which $82-billion has been committed to date. The strategy has targeted affordable housing, including community housing, rental apartment projects, developments on federal land and rapid shelter housing for those in greatest need.
However, with the strategy approaching the end of its initial 10-year lifespan and the recent creation of the Build Canada Homes agency, which is mandated to build non-market homes (also known as social housing), Ms. Volk said the CMHC is considering creating new ways to support developers that build new homes at market prices.
The Crown corporation could offer help to the home construction industry, a group often caught in the conundrum of needing to sell before embarking on new homeowner units, she said. But progress in this area is dependent on consultations with the federal department Housing, Infrastructure and Communities Canada, which Ms. Volk said her agency has started discussions with.
“We’ll see what suggestions, ideas come out of that, and we’re certainly ready. We’ve got product ideas of our own,” she said.
Ms. Volk said her focus is ensuring there are programs that create incentives to build more supply, and not just incentives that create more demand from home buyers, such as Ontario’s recent introduction of a rebate of the HST on new-construction homes.
“Our concern is making sure that we address supply, not just demand. Demand-side measures can run up prices, and so if you eliminate GST and things like that, they’re going to increase demand. You need to accompany those with new supply,” she said.
The CMHC, a long-time provider of mortgage insurance for home buyers, has been lending expertise to the $13-billion Build Canada Homes agency, set up last year by Prime Minister Mark Carney with a mandate focusing on reducing the risk of affordable housing projects to get private developers on board.
“We are doing everything we can to ensure that doesn’t cause friction in the system, that we’re actually working well together. We have a very collaborative environment with them,” Ms. Volk said.
She added that the CMHC sees part of its role as helping to create homes that are actually desirable. That means looking at the social benefits, including accessibility, climate efficiency and even the livability of each development it insures, she said.
“We definitely want to see communities built.”
When asked about offering incentives for developers to build condos with more bedrooms to support families, Ms. Volk said the CMHC’s financing assessment criteria consider unit size, but larger units are expensive to develop in cities where land costs are high.
She mentioned a First Nations-led downtown Winnipeg development in the historic Hudson’s Bay Co. building that will contain larger multiple-bedroom units as a bright spot.
“We’re seeing some successes. It is much harder in Toronto and Vancouver because of land values, obviously. It was probably a little easier to do in Winnipeg, but it can be done, and so there are ways, there are incentives we can provide, and it is absolutely a trade-off among different variables,” Ms. Volk said.
This article was first reported by The Globe and Mail
