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Canada's Housing Crisis: A Critical Analysis of the Carney Government's Plan

Strategic Insights

— 2 min read

As Canada continues to experience a significant surge in housing costs, the recent federal election highlighted the issue of housing affordability as a top concern for voters. With a record high 1.2 million new residents added to the country in 2023, and another 951,000 last year, the population has grown by about three million people since 2022, roughly matching the total population increase during the entire decade of the 1990s. However, the housing construction rate has failed to keep pace, resulting in a historic surge in housing costs.

Key Takeaways:

  • The Carney government's plan to double Canada's residential construction rate to 500,000 new homes a year within a decade is highly ambitious and may be unachievable given the current pace of home building.
  • The government's tax incentives, including a rental building allowance and GST exemption for first-time homebuyers, aim to make it faster, cheaper, and more attractive for the private sector to build homes.
  • The proposed Build Canada Homes (BCH) entity will act as a developer to build affordable housing, providing over $25-billion in financing to home builders and $10-billion in low-cost financing and capital. However, this approach is riskier and may divert limited investment dollars and construction resources away from private home building.
  • The BCH's mandate is muddled by competing goals, including delivering "affordable" homes and prioritizing certain building materials, which could increase building costs.
  • The plan for BCH's loan portfolio includes significant "low-cost" financing and a huge bet on prefabricated home building, with no certainty about who will be on the hook for any failed projects.
  • The Carney government's plan may simply reshuffle limited resources and exacerbate the shortage of skilled construction labor in Canada.
  • A more effective approach would be for the government to refine incentives, streamline regulations, and nudge municipalities and provinces to remove constraints on home building.

Statistics:

  • Canada added a record high 1.2 million new residents in 2023, and another 951,000 last year.
  • The population has grown by about three million people since 2022.
  • The housing construction rate has barely exceeded 1970s levels, despite the population growing more than tripled since then.
  • The Canada Infrastructure Bank (CIB) has approved approximately $13.2-billion in investments across 76 projects, but only two CIB-funded projects had been completed as of July, 2024.
  • The BCH will provide over $25-billion in financing to home builders and $10-billion in low-cost financing and capital.
  • The construction workforce grew by only 18.4 per cent over the last decade.

Sources:

  • "A Trade War, U.S. President Donald Trump's Threats to Canada's Sovereignty, and Global Economic Volatility Loom Large in the Recent Federal Election" by Jake Fuss and Austin Thompson, Analysts at the Fraser Institute (no publication date mentioned)
  • "Canada's Housing Crisis: A Critical Analysis of the Carney Government's Plan" by Jake Fuss and Austin Thompson, Analysts at the Fraser Institute (no publication date mentioned)
  • "Canada Infrastructure Bank" report by the Canada Infrastructure Bank (no publication date mentioned)
  • "House of Commons Committee Report" by the House of Commons (no publication date mentioned)

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