Mark Carney has a housing plan. How long will it take to implement? – National
With the Liberals winning a minority government, the focus will turn towards Prime Minister Mark Carney’s plan to fix Canada’s housing crisis.
On the campaign trail, Carney proposed a range of measures he said would double the rate of housing construction and build 500,000 new homes a year.
Housing experts and economists say some of the proposed measures are promising, but some key challenges remain. And some measures will take a lot longer to implement than others.
“Doubling the rate of building housing is extremely important because Canada has been under-building for nearly two decades and during this two decades population has been going up,” said Tu Nguyen, economist at RSM Canada.
She added, “It’s extremely ambitious to say that you are going to build 500,000 homes. Is it achievable? Maybe. It will not be easy.”
One measure Carney could push through relatively quickly is his proposed GST cut on new constructions.
Carney promised he would remove the GST for newly-built homes up to a price of $1 million, only if the person buying the home is a first-time buyer. The Liberal platform also promised to reduce the GST for new builds priced between $1 million and $1.5 million.
Steve Pomeroy, industry professor at McMaster University’s Canadian Housing Evidence Collaborative, said they could push that through as soon as Parliament reconvenes later this month.
“You could pass a legislation and say (as of) tomorrow or July 1 or whatever (date), we’re no longer going to be assessing GST on new home construction,” he said.
Penelope Graham, mortgage expert at Ratehub.ca, said while this is a move in a “positive direction,” it would be a “drop in the bucket” when it comes to actually boosting affordability.
“Will this move the dial in terms of affordability? Likely not in the more expensive markets. Pricing for brand-new construction is considerably higher than it is for resale stock. For example, the benchmark price for a new condo in Toronto is already a million dollars. That’s compared to a resale unit, which is around $680,000,” she said.
Clay Jarvis, real estate expert at NerdWallet Canada, said while the GST removal would make homes more affordable for new builds, “if you’re in the resale market, a cut like that isn’t going to affect you at all.”
The Liberal plan also promises to review the mortgage market.
The party’s platform said a Liberal government would “make mortgage payments more affordable by reviewing Canada’s mortgage market with the objective to offer Canadians more options while retaining stability in the market. This work will look at barriers to longer interest rate terms on mortgages, which would give Canadians more financial stability.”
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Graham said, “In Canada, the longest mortgage term you have access to is a 10-year fixed term. Part of it is just consumer preference. Borrowers overwhelmingly choose five-year fix terms. Even though the 10-year is available at some lenders, it just doesn’t have the uptake that has warranted a deeper look into providing more of these.”
The Liberal plan would look at allowing lenders to offer more options to homebuyers.
“It’s a positive step in that anything that broadens choice for consumers will help the overall mortgage industry and borrowers. So, it’s a positive development,” she said.
Can Canada double construction?
According to the Canada Housing Mortgage Corporation (CMHC), Canada needs to build six million new homes by 2030 to restore housing affordability in the country.
Carney says his government would double Canada’s current rate of residential construction housing over the next decade to nearly 500,000 new homes per year.
The Liberal plan would create a new federal housing entity called Build Canada Homes, that the Liberals say would oversee affordable housing construction, speed up construction and provide financing to homebuilders.
Carney said the Liberals will also extend the Housing Accelerator Fund, a policy tool used by the Justin Trudeau administration. The fund was aimed at incentivizing municipalities to ease restrictions around zoning, to allow different styles of housing to be built.
“It harkens back to the post-World War II era when the CMHC went on a building spree to house all of the returning soldiers and their growing families,” Graham said.
In a campaign ad posted to social media, Carney said he would revive Canada’s post-war housing boom.
“After the Second World War, Canada faced a housing crisis. The government built prefabricated homes that were easy to assemble and inexpensive. And those homes are still here 80 years later. Now we’re in another housing crisis, and it’s time your government got back into the business of building affordable homes,” he said.
When thousands of veterans returned to Canada after the Second World War, Canada was facing a housing crisis. To cut through the red tape and accelerate the building and approval process, Ottawa released a catalogue of pre-approved home designs that builders could start constructing straight away. Hundreds of thousands of new homes were built in Canada over a short period of time.
Much of the construction in the post-war years was done by a Crown corporation called Wartime Housing Canada, which later became the Canada Mortgage and Housing Corporation (CMHC).
Federal Crown corporations are established either by a special Act of Parliament or by articles of incorporation under the Canada Business Corporations Act.
But creating a Crown corporation from scratch would be gargantuan undertaking, one that will need a lot of work even after it is approved by Parliament.
“When [CMHC] was involved in direct delivery of various programs back in the ’70s, ’80s and ’90s, they established a network in the early post-war period of 96 branch offices across the country, staffed with architects, engineers, building inspectors, loans officers, underwriters, and so on,” Pomeroy said, adding that it could take years for Ottawa to recreate that scale.
He said, “I can’t imagine how at a single federal agency, you would actually be able to emulate that kind of support for local development.”
This new agency would essentially act as a developer and, according to the Liberal platform, “develop and manage projects and partner with builders for the construction phase of projects.”
Nguyen said that while this would be a massive undertaking, it is a necessary one.
This is because private developers often have neither the financial muscle nor the inventive to build affordable homes at scale the way the government can, she said.
“If they manage to execute it, it would really move the needle. And that would be probably the most significant policy to address affordability in a long time,” she said.
Does Canada have the workers?
All major political parties agree that Canada needs to build more homes faster, but there are few answers on who will be building the homes.
The Canadian Construction Association estimates that the industry is short by around a million workers. It is unclear where the parties plan to meet the demand for more workers.
“An influx of immigrants is needed to keep the economy healthy, but Canada’s existing policy isn’t helping the construction industry. We need to remove the bias and award more points to applicants with experience in trades or as construction labourers,” the association says on its website.
“We are slowing down the rate of immigration, which means that there might be fewer construction workers. This is also a bottleneck. During COVID-2020 and 2021, there was a construction boom and there was already a shortage of construction workers at the time,” Nguyen said.
Nguyen said that while the slowing rate of immigration has eased some pressure on rental markets like Toronto and Vancouver, Canada still needs immigration for the economy to grow.
However, some experts say that the need for labour could be significantly reduced if the parties focus on pre-fabricated housing.
Pre-fabricated housing or prefab construction is a method of building where the bulk of the construction happens off-site, often in a facility, like a factory. Either a fully-constructed modular home or parts of a house are then shipped off to the location, where it is assembled and connected to utilities. This requires fewer workers on site to assemble the homes.
Experts say building modular homes requires fewer workers working outside in the winter and in harsh environments. The Carney plan has vowed investment in scaling up production of modular homes.
“It’s much easier to train labour on a production line where you basically have one job a day, you put a window into a frame, like we do on a automobile production line,” Pomeroy said.
He added that it also promotes safer labour standards.
“If I was a construction worker, I’d rather be working in a warm factory in January than working on a site,” he said.
Ottawa could also significantly cut down on approval time with the catalogue of pre-approved housing designs released last month.
The pre-approved designs are aimed at cutting red tape and reducing approval time for new builds and include designs for rowhouses, fourplexes, sixplexes, and accessory dwelling units across the country.
