Canada wants to double construction of houses but needs workers

Canada’s housing minister has a big goal ahead of him as his government tries to curb soaring house prices: to double the pace of housing construction in the country within 10 years.

But Ahmed Hussen, who was appointed to the post after last year’s election, says Canada has no choice if it wants to continue to grow its economy and attract skilled immigrants.

“The issue of housing supply is critical to our future success as a country,” Hussen said in an interview with Bloomberg.

Home prices in Canada were already high before the pandemic before rising more than 50% in the past two years. Soaring prices have become one of the main political problems in the country.

There is significant debate over what is driving it, with limited housing supply, high levels of immigration, investor activity and rock bottom interest rates all cited as factors. But with young families becoming more expensive to own a home in most major cities, affordability has become a major issue for Prime Minister Justin Trudeau’s Liberal government.

His political rivals are interested in it. Opposition Conservative leadership favorite Pierre Poilievre posted a video on Twitter this week that lambasted housing costs and blamed the Liberals’ spending record, as well as government ‘gatekeepers’ municipal.

Increasing supply was the centerpiece of the housing plan presented in the Trudeau government’s spring budget. He said Canada has averaged about 200,000 new homes a year over the past few years and pledged to “double our current rate of new construction over the next decade”.

The plan quickly drew skepticism from analysts. “From dollars to doughnuts, it won’t happen, and it’s not for lack of good intentions,” Robert Kavcic, senior economist at Bank of Montreal, wrote in a note to investors this week.

Kavcic pointed out that housing completions are already at the highest level since the 1970s, that skilled labor in the construction industry is scarce and that city governments will fight any area effort for more density.

Avery Shenfield, chief economist at CIBC World Markets, also doubted the feasibility of the plan given labor constraints.

“Without a targeted immigration plan or a concerted effort to convince young residents to consider picking up a hammer instead of a laptop, we will continue to struggle to increase supply enough to allow more Canadians to own their own castle,” he wrote on Thursday.

Hussen said he knew that skepticism was there, but argued that his government had already shown it could deliver ambitious programs. Last year, the Liberals pledged to get all provinces to sign on to a universal child care program, and they put the final piece in place last month when Ontario agreed.

“Scepticism may be expressed, but the fact is that we have demonstrated a track record and an ability to build and collaborate with other orders of government,” he said.

The biggest new housing measure in the budget is a $4 billion (US$3.2 billion) housing acceleration fund that city governments can tap into in exchange for measures to boost housing supply.

Hussen said the details of how the fund will work are still being finalized, but it has two main goals.

First, local governments asking for the money will have to create “roadmaps” on how to overcome the obstacles that prevent them from building more housing. Second, the money can be used to speed up project approvals by digitizing records or hiring more workers to handle permit and zoning applications.

“CREDITABLE PLAN”

Hussen stressed that this money will not flow to a municipality simply based on its population.

“You have to show the political will to tackle these barriers,” Hussen said of municipalities. As an example, he pointed to zoning changes to allow for greater density near transit stations and the requirement for affordable housing in new developments.

“If they’re not willing to do any of those, or even come up with a credible plan to tackle those hurdles, then we just won’t engage,” Hussen said. “But I believe that all the municipalities will be happy about it,” he added. The program has the support of the Federation of Canadian Municipalities and the Big City Mayors’ Caucus, Hussen said.

Regarding labor shortages, Hussen argued that investments in skills training and immigration can help. “Immigration is one of the tools to address the lack of adequate housing supply, as many skilled immigrants arrive through our smart immigration policies to help us build, literally help us build our country,” did he declare.

The budget promised other things to boost supply, such as tying federal infrastructure funds to housing needs and investing an additional $1.5 billion in a fund for affordable housing projects.

Ultimately, Hussen said his government has limited tools for housing because much of the power over housing rests with provincial and municipal governments. “What we are responsible for is providing leadership to have a national approach, a national plan to address the affordable housing challenges facing Canadians,” he said.

He said he believed the money in the budget was enough to initiate substantial action at the local level.

“We’re not just asking them to do that,” he said. “We are putting significant resources on the table to incentivize them to do so, and investing in their ability and capacity to build more housing supply and build it quickly.”