Canada is facing a housing gap that requires the construction of 3.2 million new homes over the next ten years, according to the parliamentary budget officer. However, the current pace of construction is insufficient to meet this target. The latest report from the PBO indicates that there will be a temporary increase in new home builds over the next three years before returning to historical averages.
The projection suggests an annual completion of 227,000 new homes for the next decade, but an additional 65,000 homes per year will be necessary to bridge the housing gap. The Parliamentary Budget Officer, Yves Giroux, highlighted the importance of addressing suppressed demand accumulated over several years due to unmet housing needs.
There is an anticipated decline in new household formations following a reduction in Canada’s immigration targets. While this reduction may alleviate some housing demand pressure, Giroux emphasized that it will not entirely eliminate the challenge, given the significant influx of immigrants in recent years.
Giroux also pointed out the existence of suppressed demand within the housing market, with vacancy rates dropping to 3.3% in 2024, below the long-term average of 6.4% from 2000 to 2019. Low vacancy rates limit housing choices, potentially leading to higher rents or prices that exceed individuals’ financial capabilities.
The expected increase in construction and the decrease in demand are anticipated to address the low vacancy rates that contributed to soaring home prices. The PBO estimates that approximately 2.5 million homes will be constructed in the next decade, falling short of the 3.2 million needed to close the housing gap.
The report does not consider recent federal commitments to housing policies. The Liberals pledged to double housing construction during the election campaign, which could potentially impact the housing gap closure. Giroux emphasized the necessity of effective implementation of housing plans by the government at various levels to address the housing shortfall, highlighting the uncertainty of their effectiveness at this stage.
