The Canada Mortgage and Housing Corporation (CMHC) released its housing affordability report on Thursday that says 4.8 million new homes need to be built over the next decade to restore affordability to 2019 levels. CMHC’s measure of affordability is the amount of household income that goes toward housing, adding its aim is to return to levels of affordability where adjusted house prices are no higher than 30% of average gross household income. Aled ab Iorwerth, CMHC’s deputy chief economist, said the agency targetted the affordability in 2019, which was just before housing markets across the country became red hot, prices rose and supply dwindled. “When we were looking at the data, we saw that there’s been a lot of loss of affordability since 2019,” he told media on a phone call prior to the release of the report. “We’ve seen these very fundamental changes in the housing system since 2019. It’s what the pandemic led to, these structural changes that we’re seeing in the housing system and that’s why we’ve decided to look at 2019 as this aspiration to really try and address this challenge that most Canadians are now feeling.” .The supply gap of housing needing to be closed in order to achieve the agency’s goal is between 4.3 million and 4.8 million new homes built over the next ten years, Reaching that level of production means more than doubling the current pace of new home construction. To the end of May 2025, builders started 90,760 new homes in Canada, with CMHC forecasting an average of 245,000 new home will be started annually in the coming decade. CMHC's goal is achievable, said ab Iorwerth. “But not without a significantly larger and modernized workforce, more private investment, less regulation, fewer delays, and lower development costs,” he said, while calling for more innovation in construction technology and growth in labour productivity. To get to 2019 affordability levels, home prices must come down. “As we increase housing over time, house price growth will come down,” said ab Iorwerth, adding the CMHC report said increasing housing supply is “unlikely to cause financial instability because these forces take time to produce reactions,” which is why the projections were calculated on a 10-year timeline. To get back to 2019 affordability in the next 10 years would lead to house prices being in the area of 25% lower than where they would otherwise be in 2035, said the report, adding average rents would be about 5% lower. ."We’re hoping that this will be a gradual transition,” he said. “Housing supply will be increasing (and) this will start to slow the growth in house prices. Canadians will then be a little bit less keen to bid aggressively on housing and they’ll diversify their savings into other money markets or the stock exchange or whatever. And so, the pressure will be taken out of house prices.” In a report released two years ago, CMHC said an additional 3.5 million housing units were needed by 2030, on top of the 2.3 million the agency had previously projected to be built by that year to attain the affordability levels of 2004. The CMHC report released on Thursday said that timeline is no longer realistic, based primarily on the rapid rise in prices in the post-pandemic era. The report also projected the amount of household income spent on housing will rise to 52.7% by 2035 in a “business-as-usual” scenario, up from 40.3% in 2019. CMHC’s expectations are that doubling projected housing starts by 2035 would reduce the ratio to 41.1% of income being allocated for homebuying nationally. The report offered overviews of Canada’s largest markets, and the supply gaps in each. .In Calgary, where builders have had three record-breaking years for new home starts, CMHC estimated 45% more new homes annually would be needed. In Edmonton, the agency said no additional supply is required beyond what is currently projected in Alberta’s capital, as sufficient market housing is expected to be built in the region to maintain affordability by 2035. It’s Montreal that has the largest gap of any major city, where home ownership costs have risen faster than other regions in recent years, followed by Ottawa, where CMHC said new supply has not kept pace with increased housing demand. The Greater Toronto Area has seen an increase in rental construction in recent years, but the region lacks home ownership options that match local income, with CMHC estimating a 70% increase in homebuilding over the next decade would help to improve affordability issues. In Vancouver, it estimates 7,200 additional homes are needed annually above the “business-as-usual” scenario, an increase of 29%.
