“Ambitious.” A “stretch goal.” A “moon shot.”
This is how players in the housing industry are talking about the housing targets proposed by Prime Minister Mark Carney and his fledgling government. Within a decade, the Liberals promised on the campaign trail to increase housing production to unprecedented levels — aiming to create the conditions for a half-million new homes to be built each year.
In the thick of a housing crisis, industry players welcomed the ambition of this goal. But builders, analysts and academics alike are skeptical of whether it’s feasible. They warn that a large swath of Canadian land is unprepared for housing, needing major infrastructure upgrades like sewers and water systems, and that jacking up the pressure too fast risks inadvertently inflating costs for labour and materials.
An analysis of annual housing growth dating back to the 1940s, compiled by University of Toronto housing expert David Hulchanski and analyst Richard Maaranen, shows just how high the Liberals are promising to climb. Housing starts have never risen above 300,000 per year and, based on recent growth rates, their data suggests the Liberals will need to create the conditions for nearly 193,000 more homes to be built per year by the end of the decade.
“It certainly can be achieved if one is very serious,” said Hulchanski, arguing it would require building far more nonmarket housing to augment struggling private developments and address the deepest levels of housing need.
But to planner and economist Daryl Keleher, one of the biggest challenges will be ramping up construction without creating new bottlenecks in the supply chain and spurring inflation: “It’s like turning the Titanic around.”
The labour challenge
A key challenge is a human one: who will build all these homes? Will there be enough electricians, carpenters, roofers and plumbers to spread across so many developments at once? While Carney’s Liberals have suggested a wider adoption of prefabricated homes as part of their strategy, industry players say skilled labour is a key part of the puzzle.
Jim Richie, president of homebuilder Tridel, says finding workers right now isn’t an issue as the market is sluggish. But as soon as activity picks back up, skilled labour will become a hot commodity. “We will need the workers,” Richie said, pointing to immigration as one way the workforce has been increased in past.
Keleher believes any serious boost to homebuilding will not only require more workers, but massive productivity gains in the homebuilding sector to avoid cost inflations.
“You’re going to have a real competition for the people who build the homes,” he said, as well as competition for materials such as lumber and steel, the cost of which is already a concern for builders amid the U.S. trade war.
The costing challenge
Right now, private builders are struggling to keep their existing developments chugging along, let alone start new ones. Housing analyst Mike Moffatt noted preconstruction purchases have all but “evaporated” in the downturn.
“Just keeping pace, I think we should consider a victory,” he said.
Tridel’s Richie pointed out that their team currently has projects around Toronto, Mississauga, Markham and Richmond Hill in the pipeline. But they’re struggling, like many other builders, to get them over the finish line. In Richmond Hill, Richie said their planned development would primarily offer new two-bedroom terraced suites, looking out over a ravine.
“We would love to get going,” he said. “But today is not the day.”
To jolt the market, two things have to happen, Moffatt said — consumers need to be able to afford the housing on offer, and builders need to see at least modest profits, otherwise development stays ground to a halt. When the cost to build is higher than consumers are willing to pay, the market stops moving.
“Prices are going to have to fall,” Moffatt said. “There’s no way around that. There’s just too many people living with multiple roommates, or living in their parents’ basements, who historically would have had their own place by now.”
Moffatt argued elected officials should continue focusing on bringing down the fees charged to builders. Lowering the cost to build was essential, he said, because developers need to demonstrate profit margins to qualify for loans.
This is where Hulchanski believes non-profit housing can play a bigger role. By backing non-profit developments with public money, more housing projects can be insulated from economic blows. Those kinds of housing projects don’t, for example, require a certain amount of pre-construction sales before starting.
He sees that as a more fruitful path than banking on a major drop in overall home prices, suggesting politicians would be unlikely to bear a serious decline in home values, knowing it would upset existing homeowners.
“I don’t think the government will allow that to happen very long,” he said.
The land challenge
Canada’s preparedness for a firehose of new housing also depends on land. That means finding available space, whether vast open areas for subdivisions or infill space for condos. It also means ensuring infrastructure from roads to sewers are in place, or can be built out fast enough to meet the Liberals’ goal.
David Wilkes, president of the GTA-based Building Industry and Land Development Association, suggests this should be the first task on the federal government’s list. By making immediate investments in infrastructure, he said officials could lay the groundwork for a bigger housing expansion.
“To me, that’s a very big part,” he said, backing the idea batted around by officials at multiple levels of better using land already in public ownership.
Keleher pointed out they’ll need to get started soon to meet their goals: looking at other large development and planning efforts, he suggested a minimum of three to five years’ work would be needed when an area needed serious infrastructure upgrades, such as a town that currently uses a septic or well system. Those upgrades are needed before housing can be built.
While chasing the ambitious target, Wilkes hopes to see deliberate moves to ensure the resulting housing is what Canadians want and need, rather than solely what is easiest to build — such as studio-sized condos that have historically gained considerable investor uptake.
He suggested governments at all levels implement more targeted incentives and exemptions for larger two-to-three-bedroom apartments, whether condominiums or purpose-built rentals, and invest in infrastructure to support lower-rise options such as stacked townhomes.
While he considers the Liberals’ half-million-home target as a stretch to the system, he’s glad to see the pursuit: “You never achieve anything without a goal.”
