Canada’s housing shortage can only be solved by more private spending on rental construction, the Canada Mortgage and Housing Corporation said Wednesday, warning governments lack the money to meet surging demand. The report came a day after Prime Minister Mark Carney pledged to revive a 1970s tax break for apartment builders.“Private sector spending in rental construction is critical,” said the CMHC report Accelerating Rental Supply. “Governments do not have the resources to meet overwhelming demand.”Over a decade, Ottawa spent about $43 billion on housing, CMHC noted. That is almost equal to the $40 billion worth of Toronto condominiums owned by small investors alone, according to Statistics Canada. “The contrast is stark,” said the report. “The scale of private spending is vastly greater than that of government.”CMHC dismissed claims that private landlords routinely gouged tenants or relied on mass evictions. Its research found “no firm evidence” of excessive rent hikes tied to private ownership, and annual eviction rates were estimated between 1% and 3%.Rent controls and public ownership have failed elsewhere, said deputy chief economist Aled ab Iorwerth. San Francisco’s rent caps reduced supply by 15%, pushing rents up 5%, while Sweden’s strict rules have left long wait lists. Tokyo, with limited rent control and strong tenant protections, has ample rental housing..Canada has yet to match construction levels from 1976, when starts hit 273,200 — 11% higher than last year. “The current rate of rental construction is still only half the rate of the 1970s,” said CMHC. “The scale of this supply shortage is too large for governments to address on their own. More private spending is needed.”Carney on April 8 proposed bringing back the 1974 Multi-Unit Residential Building Tax Incentive, which let investors write down new apartment buildings under depreciation and capital cost allowance rules. “We are going to double down on what is already working,” he said, calling the policy “ambitious but pragmatic.”From 1974 to 1981, about 563,000 apartments were built, CMHC estimated, though it is unclear how many resulted from the tax measure. A 1981 CMHC review said the program mainly benefited developers and high-income investors, with some projects overvalued. At the time, the cost was $3,200 per unit — about $11,000 today — and many investors bought solely for the tax shelter, overlooking inflated prices and poor prospects.
