Ever wondered what it would take for Canada to get back to 2019 levels of housing affordability? Turns out, it's no easy feat.
According to the latest estimates from the Canada Mortgage and Housing Corporation (CMHC), housing starts need to nearly double from the projected rate of 250,000 new housing units annually to around 430,000 and 480,000 units per year until 2035 to close the gap. The scale of the challenge varies across the country, with Ontario and Quebec requiring far steeper climbs to meet projected demand than provinces like Alberta and Manitoba.
Since the release of this report, new housing start data is out. How close are we to closing the gap and how is Alberta doing compared to the rest of the country?
First an important note on methodology. CMHC defines affordability as adjusted house prices (homebuying affordability ratios) being no higher than 30% of gross household income, or in particularly unaffordable regions, they should remain at or below 2019 levels. To achieve these target affordability metrics, CMHC estimates the necessary additional housing supply by factoring in long-term demographic trends, current affordability ratios, and population mobility. Although these modeling exercises rely on numerous assumptions and aren’t an exact science, their analysis effectively illustrates the national supply challenge and how it varies across the country.
Bearing in mind that CMHC’s projections are based on Q3 2024 data, they conclude that Alberta would need to add roughly 14,000 more homes (mostly in Calgary) each year than current trends would produce. Edmonton, on the other hand, appears to be in a better position. If the city maintains its current pace of housing starts, its supply will likely match its population growth through 2035.
Note that Alberta’s supply pressure is partly driven by the same forces that have made it a magnet for interprovincial migration in recent years: a resilient job market and homes that remain more affordable than in Ontario and British Columbia.
If Alberta were to continue with business as usual, without a significant and sustained ramp-up in new housing, prices are projected to climb even higher. This would further erode affordability and migration from more expensive regions would only intensify price pressures in Alberta’s relatively more affordable markets.
Fortunately, home construction in Alberta has been ramping up, with the province now at record starts and diverging from the rest of Canada. Based on Statistics Canada's latest housing starts data, Alberta is currently building homes at record pace, which if sustained, would put the province on track to reach its housing supply target. This significantly outpaces other provinces, namely Ontario and British Columbia who are tracking below targets. Bottom line? Alberta’s strong momentum stands out nationally, but the CMHC findings suggest that this momentum will need to persist in order to maintain affordability over the long term.
So how does a persistent housing supply gap impact Canadians? Higher housing prices are only part of the story. When housing becomes increasingly out of reach, it limits who can afford to live and work in growing cities. That makes it harder for businesses to attract and retain skilled workers, which in turn can weigh on productivity and competitiveness. Young Canadians may delay starting families and buying homes, slowing economic growth. On top of that, rising housing costs push many families to take on more debt – leaving Canada with some of the highest household debt levels in the G7. That kind of vulnerability could amplify the impact of a future economic downturn. Closing the housing supply gap isn’t just about bringing down home prices – it’s about laying the foundation for a more resilient, productive, and inclusive Canadian economy.
Answer to the previous trivia question: Yale University is located in New Haven, Connecticut.
Today’s trivia question: What was the homeownership rate (i.e., the proportion of households who own their home) in Canada in 2021 (latest data available)?
