Yahoo Finance Housing crisis to reach 'even more alarming levels' if more isn't done: RBC
Canada’s housing crisis will reach “even more alarming levels” if more isn’t done to grow the national housing stock, a new RBC Economics report says, with a shift in immigration policy cited as one of several potential solutions.
"Solving Canada's housing crisis is a massive undertaking," RBC assistant chief economist Robert Hogue wrote in the report released on Monday.
"It will take time and tremendous resolve by governments, industry, communities, and other stakeholders to reset the path we’ve been on for decades and address the policy missteps that caused house prices and rent to skyrocket."
According to RBC, housing construction would need to increase by nearly 50 per cent from current levels "just to meet future demographic growth." Housing completions would have to rise from the current three-year average of 218,000 annually to 320,000 annually between now and 2030. Canada is already falling short of that figure. The Canada Mortgage and Housing Corporation said last week that it expects lower housing starts in 2024 amid higher interest rates, with total starts expected to reach 224,485 this year.
Interest rates are not the only factor weighing on housing construction. The report notes that the level of housing construction required "is far above anything ever achieved in Canada", and that "the construction industry has a capacity issue."
"Builders already struggle to attract and retain workers. The job vacancy rate in the construction sector is among the highest across Canadian industries," the report said. At the same time, one in five construction workers are at or will reach retirement age within the next decade, meaning 330,000 workers will need to be replaced in the existing workforce.
"Canada could need more than 500,000 additional construction workers on average to build all the homes needed between now and 2030—and even more than that in the short term to meet peak growth in demand."
RBC outlined seven solutions to fix Canada's housing shortage in the report, one of them being realigning its immigration system to prioritize construction skills. The report says Canada's recent immigrants are under-represented in the construction labour force, with just 2.4 per cent of landed immigrants between 2016 and 2021 holding apprenticeship and non-apprenticeable trades certificates, compared to 9.8 per cent during the 1980s. Construction skills should be prioritized among new arrivals, RBC says, and Canada should also expand the Federal Skilled Trades Program, allocate more points to qualified candidates based on labour market needs and fast-track candidates endorsed by employers.
Housing affordability continues to erode in Canada, with higher interest rates pushing ownership costs to a new high in the fourth quarter of 2023, according to a separate RBC report. The report says a household earning a median income would need to spend 63.5 per cent of it on the costs of owning an average-priced home in Canada, up from 61.8 per cent the prior quarter. Affordability also worsened in all markets tracked by RBC, with Vancouver, Victoria and Toronto seeing the biggest deteriorations. RBC says buying prospects in Vancouver are "now at full-blown crisis levels."
Canada will have to do more than expand the construction industry's labour pool in order to boost housing supply and improve affordability. RBC says the country should also develop new approaches to increase the number of homes produced per worker, including fostering wider adoption of prefabricated housing. The report also says project approval timelines need to be sped up, zoning regulations eased, and construction of social housing stock rapidly accelerated.
"Time is running out," the report said.
"More progress is needed and fast. Canada must grow its housing stock like never before, especially at the affordable end of the spectrum in rental and social housing... Improving Canadians' quality of life will depend on bringing about significant home and rent price relief."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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