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(MNI) Ottawa

(Repeats article first published on Feb 8)

Canada's housing squeeze that has sent prices soaring may persist unless the supply shortage is addressed by shifting away from traditional single-family suburban housing in big cities that are increasingly squeezed for space, the federal housing agency's chief economist told MNI.

“I absolutely agree with that statement” Bob Dugan of Canada Mortgage and Housing Corp.'s Bob Dugan said when asked about a shift away from major urban suburbs in favor of condos and apartments. “Especially the large cities where land costs are so high, we have to think very seriously about higher density and within that higher density, building the units that are suitable for families. Otherwise, it's very hard to tackle affordability.”

This summer CMHC expects to publish a new study showing the extent of the supply shortfall and a detailed look on how deep the needs are in specific cities, Dugan said. Since a 2018 paper found supply growth was tightest in Vancouver and Toronto even with massive price gains, unpublished CMHC data shows the pandemic has is also creating pressure in smaller cities, Dugan said.

Surging home prices have become a crucial issue for a central bank holding interest rates at historical lows and hoping not to create a bubble. The government was also held to a minority in September's election with affordability emerging as a major issue, and has promised to work on boosting supply and tackling affordability. New home prices may face upward pressure again this year because of trouble finding materials and workers, Dugan said, along with surging demand that's turned Vancouver and Toronto into cities for millionaire buyers.

The supply squeeze may take many years to resolve, Dugan suggested. It can take five years for apartments or condos to move from being sold to tenants to being built and ready to occupy, and the agency has set 2030 as a time when it wants to meet some its major housing goals, Dugan said. Strange as it may sound in land-rich Canada, its major cities are somewhat boxed in by lakes and ocean shorelines and decades of urban sprawl.


Dugan cited Scotiabank research showing a need for 1.8 million units to bring Canada’s housing per capita up to the G7 average. Canada has added about 210,000 new housing units a year on average over the last decade, he said, barely closing the gap after factoring in new household formation of between 180,000-200,000 a year.

Dozens of measures aimed at curbing excess demand have come up short, Dugan said, and it's now clear that population growth is an overwhelming force in the market's upward march.

“There are limited opportunities to expand and so the land prices get driven up because businesses are competing to be there as well as a growing city,” he said. Even in the last decade, land made up 80% of the price of a house in Vancouver and Toronto, versus 30% in Montreal.

“By necessity, Toronto and Vancouver will over time look more like other international cities and we'll see much less low-density housing near downtown,” Dugan said. As an experiment he compared maps of Manhattan from a century ago when the island still had some farmland versus when only handful of single houses remain, suggesting that kind of shift is coming to Canada.

One major challenge is most land-use rules are set at the municipal or provincial level, Dugan said, and there's lots of evidence of Nimby (Not In My Backyard) resistance to housing density. “I've heard anecdotal stories of people making threats to government officials at town meetings where they sort of float the idea of having a high-density apartment building go up in the neighborhood,” he said.

Single family houses remain popular for new projects:

Source: Statistics Canada

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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