In Canada’s topsy-turvy housing market, more supply could mean less affordability, report warns
By Murtaza Haider and Stephen Moranis
Everyone knows that Canada needs to build a significant number of homes to restore housing affordability, but coming up with an acceptable estimate is an elusive and much-debated task.
A recent report by Oxford Economics has added to the ongoing debate with a new estimate that diverges from those previously put forward by the Canada Mortgage and Housing Corporation (CMHC) and the Parliamentary Budget Office (PBO). Despite the differences in the estimates, the consensus remains clear: Canada needs to build millions more homes — which may still not be sufficient to restore affordability in the high-demand markets of Toronto and Vancouver.
The Oxford report estimates that Canada must build 4.2 million new homes between 2024 and 2035 to restore balance in the housing markets. This equates to constructing 420,000 homes annually over the next decade — nearly 70 per cent more than the average construction output in recent years.
The 4.2 million estimate comprises two segments: nearly 2.9 million homes will be needed to accommodate the new households expected to form during the decade. An additional 1.3 million homes will be required to address the housing shortfall that has accumulated over the years, suppressing household formation. If your adult children are still living with you, they are a prime example of a suppressed household.
The report predicts that affordability will gradually improve over the next decade, as housing prices are expected to rise more slowly than household incomes, bringing homeownership back within reach for typical households by 2035.
However, this optimistic forecast comes with a significant caveat. While affordability is projected to improve across most of
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