It’s no secret that Canada is facing a housing crisis. While a significant increase in supply is largely accepted as the remedy, there is little agreement on how to, or who should, proceed.
Drawing on policies that have been successfully implemented around the world and across the country, a trio of Desjardins economists have put forth recommendations to all levels of government, as well as industry leaders, on how to improve Canada’s housing supply in both the ownership and rental markets.
While there is "no silver bullet" to solving the housing crisis, a combination of policies, implemented in a coordinated fashion, can help speed up the pace of homebuilding.
"We know from our research the number of units we need to build given the population growth, as well as the constraints [to building]. The natural next step was to explore those constraints and what should be encouraged in order to alleviate them," Jimmy Jean — Vice President, Chief Economist and Strategist at Desjardins, and one of the authors of the report — told STOREYS.
"We looked at measures that were taken in many jurisdictions — in Europe, in the US, and also in Canada — and we blended those with other relevant ideas to come up with this set of recommendations."
At the federal level, funding transfers to incentivize homebuilding will be a pivotal step. While the Housing Accelerator Fund was a "good start," the economists found that it is ultimately "insufficient," and its execution has been "woefully lacking."
Instead, officials should consult with municipalities directly in order to identify where the bottlenecks to building lie, and where funding should be allocated. Tax incentives, such as removing the GST and HST on purpose-built rentals, would also help stimulate building.
As well, the federal government must ensure the pace of population growth is sustainable, and doesn’t weigh on affordability; currently, it is on track to do so, a separate Desjardins report found. If the government opted to prioritize immigrants with skilled trades training, they could offset labour shortages in the construction industry and help meet the need for more housing.
By reducing or waiving development charges on new purpose-built rentals, provincial governments, too, can incentivize construction.
This is evidenced by Vancouver’s Rental 100 Program, which waives development cost levies to incentivize construction of purpose-built rentals. Between 2007 and 2012, rentals accounted for just 11% of the city’s housing starts. Between 2013 and 2018, after the program was introduced, they accounted for 36%.
A "considerable" help would be giving cities the power to introduce measures that would speed up residential investment in their jurisdictions.
As well, restricting short-term rentals of non-principal residences would open up additional housing. According to the report, there are more than 18,000 active short-term rental listings on VRBO and Airbnb in Toronto alone, a stat that is "particularly notable" given the city’s status as one of the most unaffordable in Canada. Recent legislation passed in Quebec allows only registered, eligible hosts to list a short-term rental, effectively cracking down on illegal accommodations.
At the municipal level, officials must make a concerted effort to reduce barriers to home building, such as ending exclusionary zoning and adopting as-of-right zoning to increase density.
Much has been said about office-to-residential conversions, but the report advocates instead for retail-to-residential redevelopment. Repurposing existing greyfield sites, like under-utilized shopping malls, cities could add "a lot more units in a relatively short order."
Meanwhile, the construction sector must boost productivity, which the report notes has been lagging for some time, through avenues such as prefabricated homes and pre-approved plans from municipalities.
Although input costs have risen considerably, due to high interest rates and the increasing cost of materials, they can be offset by government policies that lower taxes and offer subsidies.
"It’s past due time for governments to put measures in place to offset those cost pressures," Jean said. "Builders have no incentive. Between labour and materials costs, they’re basically building at a loss."
"This crisis demands solutions from all layers of government and also from industry. But for some reason it seems like in Canada we’ve been busy deflecting responsibility or debating the issue and not executing. And that’s really been a frustration."
Jean and his co-authors came to many of the same conclusions as the National Housing Accord, which published a blueprint earlier this month recommending how the federal government can build two million purpose-built rentals by 2030, and restore affordability.
While the reports were published independently of one another, their overlap is telling of both the urgency of the situation, and the solutions that must be undertaken in order to solve the crisis.
"This has rapidly become a crisis situation and there’s a lot at stake," Jean told STOREYS.
"In Canada we consider housing a fundamental human right. So it’s only natural that the government step in and provide incentives that would be for the greater good if we have more housing being built more rapidly."
