The Canadian government is underestimating the number of new homes needed to address a spiraling affordability crisis by about 1.5 million units, according to Canadian Imperial Bank of Commerce research.
While Canada’s national housing agency says the country needs to add 3.5 million extra units by 2030 to make shelter affordable, the true number is actually about 5 million additional homes, CIBC economist Benjamin Tal wrote in a report Tuesday. Tal traced the problem to population figures he says don’t adequately count non-permanent residents.
Prime Minister Justin Trudeau’s government is grappling with a nationwide surge in housing costs that political rivals have seized upon for attacks. While the government has tried to make up for years of underbuilding with a raft of policies to boost supply, these have yet to have a meaningful impact on the market. That’s turned attention to how the government’s attempt to drive economic growth by boosting immigration has further knocked supply and demand out of balance.
High interest rates and a slowing economy are further challenging the government’s efforts to boost supply. In December, the total value of building permits in Canada plunged 14 per cent from a month earlier, reaching the lowest monthly level in more than three years, Statistics Canada reported Tuesday. The total value of residential permits fell 17.9 per cent, due largely to a significant drop in multi-unit permit construction intentions.
Much of Canada’s recent population growth has come through non-permanent resident programs — foreign students and temporary workers — which the federal government did not cap and were mainly driven by demand from educational institutions and employers. The Trudeau government’s latest move was to introduce a cap on the number of foreign students.
But CIBC’s Tal says that even if that cap works as intended, growth in other types of non-permanent residents would still ensure about two per cent annualized population growth, or 6 million new people over the next seven years. That kind of growth coming on top of the already-bigger than anticipated population means Canada will need to build considerably more housing than the government thought, Tal said.
“There are no credible forecasts, targets, or capacity plans across governments for non-permanent residents — the population which accounts for the vast majority of the planning shortfall. That must change,” he wrote. “Meaningful forecasting, targets, and integrated planning must be conducted for all permanent and temporary visa approvals to be meaningful.”
In an interview with Bloomberg News, Immigration Minister Marc Miller acknowledged the recent migration surprises have immediate public policy implications, and agreed the government “could do a better job of dealing with the aggregate numbers so people know what they’re solving for.”
Still, he pushed back on suggestions that more predictable population forecasts would have resulted in matching investments in housing and social services from provinces and cities.
“Let’s not fool ourselves in thinking that even if we were to project out for 10 years, that people would automatically adjust, because people get elected and unelected based on their ability to fulfill promises to the people that got them there,” he said. “They sometimes get elected on cuts.”