Despite a record number of 650,000 construction workers in 2023, Canada's housing production, at 240,267 units, fell short of the potential for over 400,000 homes per year. While more human and financial resources have been dedicated to residential construction in recent years, housing starts have not kept pace.

To meet the Canada Housing Plan's goal of building 3.87 million new homes by 2031, regulatory reforms and industry consolidation are needed to increase efficiency and productivity. The Housing Accelerator Fund (HAF) is a crucial step toward achieving this goal.

Since the launch of the Canada Housing Plan and the subsequent release of the 2024 federal budget, several analysts have questioned the country's ability to build 3.87 million homes by 2031. While labor shortages remain an obstacle to increasing supply, approximately 650,000 workers were building homes in Canada in 2023, the highest number ever recorded. Yet, construction has not kept pace with the growth in resources dedicated to it.

Productivity Challenges and Solutions

Current resources should allow us to build an additional 130,000 to 225,000 homes each year, equating to an annual rate of over 400,000 housing starts. Achieving this full potential will require structural changes that extend well beyond the short-term horizon. However, changes currently being implemented across the country could help us get closer to this goal, such as changes to municipal regulations.

Governments and the housing sector must do more to achieve better housing outcomes.

Disparity Between Resources and Housing Starts

Until the mid-2000s, housing starts closely followed employment in residential construction and the sector's share of GDP. In subsequent years, however, the pace of construction did not keep up, even as more resources were dedicated to residential construction (dollars and labor).

In 2023, employment in the residential construction sector was estimated to be 140% higher than in 1997, and the residential construction component of GDP had increased by 130%. However, the increase in housing starts was "only" 63%. While the increase is significant, it represents less than half of the additional resources used to achieve this result.

Conclusion: Regulations and Production Must Take Center Stage

The number of housing starts per population varies by city, suggesting that regulations, especially at the municipal level, play a crucial role in accelerating construction. In addition to the time needed to issue permits, there are regulations on the number of floors and units in buildings, development fees (some regulated at local and regional levels), and many other aspects.

Consolidation in the construction sector could also generate economies of scale, making the construction of affordable housing more profitable. For years, the residential construction sector has indicated that regulation was the main obstacle to building more homes. While progress has been made, much remains to be done.

In addition to the billions of dollars committed and invested in construction and renovation over the past 10 years, the federal government recently launched the Housing Accelerator Fund (HAF). This program is designed to finance regulatory changes at the municipal level to accelerate residential construction. At the time of publishing this article, agreements had been made with 179 municipalities under the HAF.

Important discussions also need to take place with employers, unions, and workers in the residential construction sector. What are they willing to do to increase housing starts and allow Canada to build to its maximum capacity in exchange for increased regulatory flexibility?