The Canada Mortgage & Housing Corporation (CMHC), a federal crown corporation and Canada’s national housing agency, “helps Canadians meet their housing needs, champions research, and advises on the housing industry”.
This brief summarizes and puts into context select findings from CMHC’s most recent report, titled “Canada’s Housing Supply Shortages: Estimating what is needed to solve Canada’s housing affordability crisis by 2030”.
Some Background
A lack of affordable housing can have wide-ranging ramifications, including imposing inter-generational challenges (related to children being unable to afford a place to live as they transition into adulthood) and limiting the mobility of labour (and skills), which can serve to, in turn, constrain economic growth.
Previous CMHC research has identified the drivers of home price increases, including demographic change, income growth, and the long-term decline in interest rates. With housing supply having been slow to respond to the growing demand for homes over time, this most recent CMHC report quantifies how much more housing supply is needed, beyond what current trends
What We Need to Do to Achieve Affordability
Nationally, the report concludes that Canada needs 3.5 million additional homes to be built—beyond the 2.3 million that are already expected to be added—between 2021 and 2030.
It’s worthwhile to consider that the 3.5 million additional homes translate to an average of 389,000 additions annually by 2030— this being in addition to the 256,000 homes expected to be built annually as part of CMHC’s current-trends forecast. For context, Canada started construction on almost 245,000 homes in 2021, which was an all-time high; looking back a little bit further, Canada started an average of 209,000 homes annually over the past five years (2017 through 2021). As such, the combined 645,000 annual additions required nationally to achieve affordability by 2030 would represent a more than tripling (a 209% increase, to be precise) of what we averaged over the past five years, which also happens to be the most housing additions Canada has made in any five-year period in our history.
The magnitude of the challenge in British Columbia doesn’t appear to be much different from that at the national level. Specifically, CMHC concludes that BC would need to add 570,000 homes— again, above and beyond the trend expectation of 423,000 homes being added—by 2030. This would mean building more than 110,000 new homes each year between 2021 and 2030, which would be 174% more than we added over the past five years (40,000 annually), and 155% more than the all-time high we achieved in 2021 of 43,000.
Given the current economic, demographic, and political landscapes, these targets are clearly more aspirational than they are realistic.
Next Steps
This latest report from CMHC focuses on the national and provincial landscapes of housing affordability and does not address the situation within regional housing markets, where concerns about housing affordability are arguably the greatest (such as in Metro Vancouver). While replicating this research at the regional level would be welcomed, the report itself notes that “we need to take drastic measures now to produce more housing—not more reports.” Cheeky, yes, but true.
While achieving these targets by 2030 is about as likely as the Canucks winning the Stanley Cup this upcoming season, governments and developers must continue to work closely together to create conditions that are as favourable as possible to enabling the realization of new housing supply.
This could include, but would not be limited to: speeding up development approval timelines; permitting additional density; subsidizing housing for lower-income households; providing tax and financing incentives to encourage the construction of specific housing types, such as rental; identifying and attracting migrants with the required skill sets to build new housing; and better-utilizing un-, or under-, developed land.
Market Report
June was characterized by below-average sales activity and a continued expansion of inventory, which in turn yielded marginal price declines both north and south of the Fraser River.
With interest rates and housing supply increasing, Metro Vancouver home buyers are operating in a changing marketplace to begin the summer season.
The Real Estate Board of Greater Vancouver reports that residential home sales in the region totalled 2,444 in June 2022, a 35 per cent decrease from the 3,762 sales recorded in June 2021, and a 16.2 per cent decrease from the 2,918 homes sold in May 2022.
Last month’s sales were 23.3 per cent below the 10-year June sales average.
Home buyers have more selection to choose from and more time to make decisions than they did over the past year. Rising interest rates and inflationary concerns are making buyers more cautious in today’s housing market, which is allowing listings to accumulate.
There were 5,256 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service in Metro Vancouver in June 2022. This represents a 10.1 per cent decrease compared to the 5,849 homes listed in June 2021 and a 17.6 per cent decrease compared to May 2022 when 6,377 homes were listed.
The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,425, a 3.8 per cent decrease compared to June 2021 (10,839) and a 4.1 per cent increase compared to May 2022 (10,010).
We’re seeing downward pressure on home prices as we enter summer in Metro Vancouver due to declining home buyer activity, not increased supply. To meet Metro Vancouver’s long-term housing demands, we still need to significantly increase housing supply.
For all property types, the sales-to-active listings ratio for June 2022 is 23.4 per cent. By property type, the ratio is 14.3 per cent for detached homes, 31.5 per cent for townhomes, and 30.2 per cent for apartments.
Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.
The MLS Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,235,900. This represents a 12.4 per cent increase over June 2021, a two per cent decrease compared to May 2022, and a 2.2 per cent decrease over the past three months.
Sales of detached homes in June 2022 reached 653, a 48.3 per cent decrease from the 1,262 detached sales recorded in June 2021. The benchmark price for a detached home is $2,058,600. This represents a 13.4 per cent increase from June 2021, a 1.7 per cent decrease compared to May 2022, and a 1.8 per cent decrease over the past three months.
Sales of apartment homes reached 1,326 in June 2022, a 25.3 per cent decrease compared to the 1,774 sales in June 2021. The benchmark price of an apartment home is $766,300. This represents a 12.7 per cent increase from June 2021, a 1.7 per cent decrease compared to May 2022, and a 0.8 per cent decrease over the past three months.
Attached home sales in June 2022 totalled 465, a 36 per cent decrease compared to the 726 sales in June 2021. The benchmark price of an attached home is $1,115,600. This represents a 17.8 per cent increase from June 2021, a 2.2 per cent decrease compared to May 2022, and a 2.7 per cent decrease over the past three months.
