Report Identifies Labour Shortage in Construction as Key Challenge to Ottawa’s Housing Plan
A recent Desjardins report cautions that despite Ottawa’s efforts to stimulate new housing supply, reaching “optimistic” targets may be challenging due to regulatory obstacles and constraints on labor, materials, and financing.
The report, authored by economists Marc Desormeaux, Kari Norman, and Randall Bartlett and released on Tuesday, highlights the ongoing shortage of labor in the construction industry as the primary factor hindering new housing starts.
Earlier this year, the federal government introduced the Canada Housing Plan with the aim of unlocking 3.87 million new homes by 2031 through initiatives like tax incentives and increasing housing construction on public lands.
The report indicates that 1.87 million of these homes were already expected to be built by 2031 without additional measures.
It suggests that the federal housing plan could lead to nearly 70,000 extra housing starts in 2028, on top of the approximately 235,000 projected to be constructed without these measures.
Despite this increase, the figures still fall short of the necessary pace to achieve the Canada Mortgage and Housing Corp.’s estimated targets by 2030 to restore affordability. CMHC has stated that the country would need to increase home construction by 3.5 million units, resulting in a total of 5.8 million new homes built within that timeframe.
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“Building 5.8 million new homes in the next eight years would be a challenging task even with everything falling into place,” the authors stated, noting that it took thirty years to construct the last 5.8 million homes in Canada.
“Given significant obstacles in labor, materials, financing, and regulations, the necessary conditions are not currently present in Canada.”
The Canadian Home Builders’ Association estimates that Canada requires over one million additional residential construction workers to meet CMHC’s target.
“Given slower population growth and an immigration system that doesn’t prioritize attracting skilled tradespeople, a larger portion of domestic resources will need to be allocated to residential investment to meet federal housing goals,” the association explained.
Rising interest rates and inflation have also raised the costs of financing construction projects, along with regulations mandating the use of more expensive, climate-resistant building materials due to extreme weather conditions.
“However, just because Canada is unlikely to achieve that ambitious goal doesn’t mean efforts should be abandoned,” the authors emphasized.
“Even if complete ‘affordability’ as defined by CMHC is not attained by the end of the decade, addressing the housing supply crisis can still be beneficial through maximizing home construction.”
