If Prime Minister Mark Carney succeeds with his $26-billion bet on solving the housing crisis there will be many winners.
They include Canadians who can’t start a family because even modest houses are unaffordable. The current national average house price is $702,800.
The money Ottawa invests in housing will create work at a time when jobs are at risk from U.S. tariffs. The national jobless rate rose to seven per cent in May, close to a nine-year high outside of the pandemic.
And the unprecedented backing Carney plans for the factory-built, or prefab, housing sector, where Ottawa will commit most of the $26 billion, holds promise of creating a new export industry.
That’s what Carney meant in saying “we will create an entirely new Canadian housing industry.”
Canada has several world-class makers of prefab homes. But for now, those builders are limited in number relative to potential demand for their products, and many are operating below capacity.
The feds are returning to the housing market after a decades-long absence.
During that absence, the private sector did not build enough houses. The current pace of housing construction, at fewer than 300,000 units per year, is far below the 1970s peak of more than 400,000 per year.
And the private sector built oversized houses and luxury condos rather than affordable housing.
There’s reason to be skeptical about the Liberal government’s promise to double housing construction to 500,000 units per year.
The previous Liberal government set a target of 3.87 million new homes to be built by the end of the decade, mostly by the private sector.
Little progress was made toward that goal. And the benchmark house price rose by almost 60 per cent in the Trudeau years.
Why should Carney’s intervention in the complex housing market achieve a better outcome?
One reason is that Carney is emulating a tried-and-true formula of government-sponsored housing that has worked before in Canada, works today in Sweden and Japan, and is under consideration in Britain and Germany.
It worked in Canada in building postwar homes, and again in the 1960s and 1970s in creating an enormous amount of housing in response to a previous immigration surge.
Carney plans to create a new federal agency, Build Canada Homes (BCH), dedicated to financing the construction of new homes and placing bulk orders for them.
That addresses two problems that have held up adequate provision of affordable housing.
BCH will provide the essential financing in a highly fragmented residential construction industry of mostly small businesses that lacks access to capital. The scarcity of capital dissuades house builders from taking on new projects.
And with its bulk purchases, BCH also guarantees a high minimum level of demand. Housing financed by Ottawa will find owners and managers, many in the non-profit and co-op sectors including seniors, student and Indigenous housing.
Builders in the cyclical housing industry are often reluctant to take on new projects for fear that demand will dry up before their projects are completed — the fate of Toronto developers in the prolonged slump in the condo market.
Taxpayers aren’t on the hook since the government financing is in the form of loans, collateral for which is new housing that appreciates in value.
That’s how we solved previous housing crises, the twist this time being Carney’s emphasis on factory-built housing. This building method is often called modular, because floors, walls, ceilings and entire kitchens and bathrooms are built in a factory and assembled on site.
Modular housing is the cheapest way to build a lot of housing quickly.
In Sweden and Japan, where prefabricated homes account for more than 15 per cent of total housing stock, the modular industry was kick-started by government.
Canada’s builders of modular housing, who also build schools, hospital wings and cottages, need a similar jump-start from government to ramp up production.
That still leaves the crazy quilt of varied provincial and municipal zoning bylaws and building codes to navigate.
“Factory-built homes can speed up, increase affordability and make homes more sustainable — but only if demand is guaranteed and roadblocks are diminished,” Carolyn Whitzman, adjunct professor at the University of Toronto’s School of Cities, recently posted on LinkedIn.
Cities like Calgary, Edmonton and Vancouver have shown the way in cutting red tape. But many local obstacles remain, including steep developer fees that cities need to finance infrastructure to support new housing.
A two- or three-year moratorium on such fees, covered by Ottawa and provincial governments, would accelerate housing construction.
And a catalogue of standardized home designs released by Carney during the recent election needs to be updated to conform with the most common building-code requirements across the country.
Canada is in a good place today with all the discussion of nation-building projects. It’s hard to think of a project more important than providing a decent home for all who need one.
