Canada is facing a significant housing shortage, with the parliamentary budget officer estimating that 3.2 million new homes need to be built in the next ten years to address this gap. However, current construction rates are not on track to meet this demand.
The latest report by the parliamentary budget officer anticipates a temporary increase in new home builds over the next three years, followed by a gradual return to standard levels. The projection suggests an average of 227,000 new homes completed annually over the next decade, but an additional 65,000 units per year are necessary to bridge the housing gap.
Parliamentary Budget Officer Yves Giroux highlighted the importance of considering the pent-up demand that has accumulated over the years due to unmet housing needs. He emphasized that despite adjustments to immigration targets leading to a decline in new household formations, the pressure on housing demand persists due to the influx of immigrants in previous years.
Giroux also pointed out the existence of suppressed demand caused by segments of the population being priced out of the housing market, resulting in a vacancy rate of 3.3% in 2024, significantly lower than the historical average of 6.4% from 2000 to 2019. This situation has limited housing choices for individuals, potentially leading to higher rents or unaffordable housing options.
To address the housing crisis, increased construction activity and reduced demand are expected to normalize the vacancy rate, which has contributed to escalating home prices. The PBO estimates that approximately 2.5 million homes will be constructed in the next decade, falling short of the 3.2 million required to close the housing gap.
Despite recent federal promises to double housing construction, Giroux emphasized that the effectiveness of these initiatives in closing the housing gap depends on successful implementation by Ottawa and other levels of government. The impact of these commitments remains uncertain, and their effectiveness in addressing the housing shortage is yet to be determined.
