In order to get back to pre-pandemic levels of affordability, Toronto will need about 32,000 more housing units annually over the next 10 years, a 70 per cent increase from the current pace of housing starts, according to a new report from the Canadian Mortgage and Housing Corp. (CMHC).
That would mean a total of roughly 75,600 starts a year — a target that’s complicated by the current condo market, said deputy chief economist Aled ab Iorwerth on a call with media Thursday morning.
“The developers are really reluctant to put shovels in the ground at the moment,” he added, due to price and sales declines.
Because of this he anticipates to see “quite a downturn in construction in Toronto” over this year and next.
There’s a “desperate need for more housing supply,” from condos to rentals to houses, he said, “so this shortfall in the near term will probably cause challenges in the longer term.”
The report looked at how many new housing starts would be needed annually to get back to 2019 levels of affordability by 2035.
Nationally, the number will need to double the current pace, to between 430,000 and 480,000 a year, for a total of 4.8 million over the next decade.
Ontario needs 130,000 more annual housing starts, while Vancouver needs about 7,000 more, Montreal 49,000, Ottawa-Gatineau 16,000, and Calgary 9,000. Edmonton is on track to meet affordability targets.
Previous reports from the agency focused on what would be needed to get back to 2004 levels of affordability. In 2022, CMHC predicted that as many as 1.85 million homes were needed in Ontario to get there BY 2030.
At that time, the average Ontario household spent about 40 per cent of its disposable income for an average priced home.
But Mathieu Laberge, chief economist and senior vice-president of housing insights with CMHC, said it makes more sense to now look at 2019, because there’s been a “fundamental change” to Canadian housing since the pandemic, with the rise of remote work.
The question of whether housing prices should go down is a controversial one, as so many homeowners have their retirement funds tied up in their homes.
Canada’s new federal housing minister, Gregor Robertson recently said that prices don’t need to drop for affordability to improve.
Ab Iorwerth said with more supply, “the pressure will be taken out of house prices,” gradually, without a “sudden overnight lowering.”
Ideally Canadians would then be “a little bit less keen to bid aggressively on housing,” put less of their savings into mortgages, and diversify their money more.
But he acknowledged that “house prices in 2020 were maybe a little artificially high, and “would not rule out house prices going down anywhere.”
As for the drop in prices that’s already happening in places like Toronto — 20 per cent since the pandemic peak, he said CMHC is monitoring the situation.
At the moment he said this does not pose a risk to financial stability.
Though, “that’s not to say that individual households are not facing challenges.”
