With Canadian housing markets having experienced six consecutive months of sales declines, it may come as a surprise there is concern about a lack of housing supply in the country..That’s according to Christopher Alexander, president of Re/Max Canada, which just released its 2022 Housing Inventory Report that highlights chronic supply issues across Canada..Re/Max found inventory levels are currently below the 10-year average in seven major markets, with double-digit declines recorded in Ottawa, Halifax-Dartmouth, Montreal, Calgary, Winnipeg, and Greater Vancouver..It’s more than a matter of new listings coming to the market, says Alexander, it’s about developing a new way to build new homes quicker..“The challenge is we need a new development and growth strategy that is geared toward the long-term outlook,” he says. “There simply isn’t enough stock to keep pace with demand now, and the need for housing is intensifying with population growth.”.“Although demand is currently softer than we’ve seen in the last two years, it is expected to rebound, and our market is not prepared for when that happens. We’re seeing fewer housing starts at a time when we should be getting ready for the next inevitable upswing.”.Building new homes is a slow process, made even slower by bureaucratic barriers set up by governments at all levels, says Alexander..“Experience tells us the only thing slower than the new home building process might be government processes,” he says..“Removing barriers and cutting red tape are necessary. A crisis is looming, but the outcome is not cast in stone. There is a short runway to reverse course before the impacts become very real for Canadian homebuyers and renters.”.Alexander says builders must maneuver through a bureaucratic maze that includes zoning restrictions, development fees and levies, approval processes and more before new homes can be started..“Policies that support and accelerate residential building activity are paramount to avert a deepening of the inventory crunch impacting Canada’s real estate markets,” he says..“Without action, affordability will, without question, move further out of reach. A sustainable strategy is needed with an implementation plan that is fast-tracked.”.Alexander points out in the City of Toronto it takes years to get a project approved and then more time on top of that to build it because there is so much bureaucracy and hoops to jump through to get anything going..“Removing barriers and cutting red tape is necessary,” he says. “A crisis is looming, but the outcome is not cast in stone. There is a short runway to reverse course before the impacts become very real for Canadian homebuyers and renters.”.Canada Mortgage and Housing Corporation (CMHC) said Canada needs 3.5 million new homes to be built by 2030 in order to bring prices back to more affordable levels, which equates to 500,000 new homes being built per year, for the next seven years..That just isn’t going to happen at the current pace of construction, which is averaging only 200,000 to 300,000 new homes per year, says Alexander..A CMHC report released this week says new housing starts were down 3% in August from July, for a seasonally adjusted annualized rate of housing starts (the expected number of homes to be started in 2022, based on August’s activity) of 267,443 compared to 275,158 units in July..“The truth of the matter is that we probably need more than the CMHC estimate to create the desired level of affordability,” says Alexander. “During this window of softer demand, building efforts should be ramped up, not down. The offshoot effect is straining rental markets and contributing to ever-rising levels of homelessness throughout the country.”.“The deep-rooted issue requires urgent action from all levels of government to help bring more inventory to the market, particularly with the number of new homes being constructed falling well below the levels required to welcome record numbers of new Canadians in the coming years.”.Along with inflation, high interest rates and slow municipal approval processes, other factors have emerged, creating a perfect storm impacting available housing, now and in the future, from increased global supply chain interruptions, swelling construction costs and a serious shortage of labour, to high land acquisition costs, says Elton Ash, executive vice-president of Re/Max Canada..“Current market realities have upended the economic viability of many developments, causing new residential projects to be cancelled or put on hold indefinitely,” says Ash. “The feasibility of many new or planned housing starts is now in question, but the ones that already had smaller margins, such as affordable housing and starter homes, are at the top of the chopping block.”.“If we’re already experiencing an inventory crisis, what will the consequences be when demand rebounds?”
