A new report released by the federal government’s Office of the Parliamentary Budget Officer (PBO) estimates Canada will need to build about 1.3 million new additional homes between 2024 and 2030 beyond the baseline/status quo to “eliminate” the country’s housing gap, which accounts for the number of households that would otherwise not be created.
This equates to an average of 180,000 new additional homes completed each year through 2030.
In total, when the baseline/status quo projection of 1.8 million and the additional need of 1.3 million are combined, there would be a net gain of 3.1 million new additional homes built by 2030 or an average of 436,000 new additional homes annually. But this would also equate to an 80% increase of 2023’s record of 460,000 new additional home completions.
If achieved, this would also return Canada’s rental housing vacancy rate to its long-term average by 2030, following the estimated historic record low of 5.1% in 2023, which is 1.8% below the average of 6.9% between 2000 and 2019.
If the status quo with housing completions were to continue, the rental housing vacancy could contract to new record lows of possibly 3.9% in 2025 before stabilizing at around 4% by 2030. Further contractions of the vacancy rate due to unmet supply and high demand would further push up home prices and rents.
In September 2023, Canada Mortgage and Housing Corporation (CMHC) made its separate housing supply gap estimate, with the forecast that Canada would need 3.5 million new additional homes — about 436,000 new additional homes per year on average — which is nearly three times more than PBO’s estimate of 1.3 million. But CMHC’s figure also has the added variable of restoring home affordability to 2004 levels by 2030.
PBO estimates that between 2000 and 2023, Canada’s housing supply grew by 4.5 million units — from 12.6 million to 17.1 million or an average of 195,000 per year. If new supply levels were adequate, 631,000 or 4.1% more households would have attainable housing options in 2021, according to PBO estimates.
However, sustained higher levels of home construction are particularly challenged by high inflation for construction materials, equipment, and labour, especially with the labour shortage in skilled trades, along with growing land costs, continued high borrowing costs, and economic uncertainty.
The housing challenges in recent years since the pandemic are further exacerbated by the federal government’s immigration policies, resulting in record levels of inflows.
PBO and CMHC’s latest forecasts do not take into account Prime Minister Justin Trudeau’s newly announced major housing initiatives, and the recent measures of various provincial and major municipal governments.