It’s one of the top three campaign promises by one of each of the three people most likely to be the next prime minister of Canada: Tackle and solve Canada’s housing crisis.
Pierre Poilievre, leader of the Conservative Party of Canada, Chrystia Freeland and Mark Carney, one of whom is most likely to become the next leader of the Liberal Party on March 9 have all released their plans for housing, and all promise to increase the supply of new homes among their plans.
Canada Mortgage and Housing Corporation (CMHC) estimates Canada needs 3.5 million additional housing units by 2030, on top of the 18.2 million units projected to exist by then, to restore affordability.
It’s a goal that requires an enormous financial commitment, says Steven Globerman, a senior fellow at the Fraser Institute, in a new report.
“If policymakers, including the next prime minister (whoever that may be) want to substantially increase housing affordability, they must also enact policies (such as) tax reform and spending reductions, that improve the savings and consumption decisions of households and governments.”
Globerman is advising policymakers to take a broader approach, one that goes beyond reducing red tape and increasing housing supply, arguing any serious affordability plan must also focus on increasing domestic savings to fund large-scale home construction.
Focusing in on affordable housing construction costs in Toronto, one of the most expensive cities in Canada, building each unit costs between $472,000 and $520,000 (not including land costs), says Globerman.
“Using the lower estimate, the total cost to build 3.5 million units would be approximately $1.65 trillion over five years, or $330 billion per year,” he says.
That level of investment is nearly impossible under current conditions. Canada’s total gross savings in 2023 was $695 billion, meaning Canadians would need to increase their annual savings by almost 50% to fully finance the required housing supply, writes Globerman.
“That’s not a realistic goal,” he says. “Moreover, given the Trudeau government’s accelerated rates of immigration in 2023 and 2024, the CMHC’s 3.5 million number is likely now too low to achieve ‘affordability,’ so the price tag would be even higher.”
Sourcing foreign capital is also not viable, says Globerman.
“In Canada and other wealthy countries, domestic savings remain the main source of financing for domestic investments,” he writes, adding a potential way to boost domestic savings is through monetary policy adjustments, including higher interest rates.
An approach that would likely do more harm than good, says Globerman.
“While raising interest rates would encourage increased domestic savings, it would also choke off demand for construction loans, which would slow housing construction,” he writes. “Higher borrowing costs would also make homeownership even less affordable for prospective buyers, worsening the very crisis policymakers are trying to solve.”
With the imposition of US tariffs on steel and aluminum imports on the horizon, materials that are vital to homebuilding, home builder associations across Canada are warning the tariffs could be a brutal blow to the housing sector and housing affordability, pushing new home prices, followed by resale home prices, out of reach for most Canadians.