Canada’s current pace of homebuilding will see the country face a gap of 3.5 million units by 2030, falling well short of the bar for housing affordability, according to a new report.
The agency projects that Canada will add an additional 2.1 million housing units between 2021 and 2030, hitting a total stock of 19 million homes nationally.
But that will be well short of enough units to make housing affordable for all Canadians, the CMHC said.
It projects Canada will need well over 22 million units by that time to put affordable roofs over the heads of the growing population.
Canada’s construction industry would have to more-than double its expected pace of building over that timeframe.
“Canada’s approach to housing supply needs to be rethought,” the report states.
“The evidence has been mounting for many years that the housing supply system is broken in many parts of Canada.”
B.C., Ontario need biggest boosts
The CMHC notes, however, that supply is only one factor affecting affordability, and ramping up the pace of building will not solve the problem on its own. Other inputs not accounted for in the report include government policies affecting demand and the longevity of work-from-home trends post-pandemic.
Two-thirds of the housing gap will be felt in Ontario and British Columbia, the report finds. Quebec is also mentioned as needing a bump in supply over the coming decade.
But if Ontario is able to deliver the 1.85 million extra units the CMHC is prescribing in its report over the next 7.5 years, the price of the average home would drop to $499,000 from 2021 figures of $871,000.
In B.C., an additional 570,000 units beyond today’s trajectory could drop the average home price to $679,000 in 2030 compared to $929,000 as of last year.
The housing market begins to soften
These forecasts don’t necessarily predict that same drop-off in value for existing homes, but reflects a bigger proportion of cheaper, multi-unit builds in the market.
CMHC also notes that its projection, which assesses affordability for the average income, falls short when considering housing affordability for low-income Canadians, and says future reports would look at improving access for these households.
“The average household in British Columbia just simply cannot afford average housing today. And that’s what we’re trying to fix,” said Aled ab Iorwerth, CMHC’s deputy chief economist, in an interview with Global News on Thursday.
While the CMHC report focused on housing gaps by province, ab Iorwerth said that much of the stock will need to be concentrated in large urban centres such as the Greater Toronto Area and Metro Vancouver.
These cities, where housing is already out of reach for many, must take the affordability question seriously, lest they drive away desperately needed skilled talent.
“We need people to come into our large urban areas. Housing costs are preventing them from moving. So this is potentially putting quite a damper on the long term economic prospects for these cities,” he said.
CMHC target not feasible, expert says
The goal to add an extra 3.5 million homes to Canada’s housing supply on top of the 2.2 million already expected to be completed by 2030 is a “massive undertaking” according to Mike Moffatt, senior policy director of the Smart Prosperity Institute.
“I don’t think we’ll be able to do this, just to put it bluntly,” he told Global News.
In addition to rising material prices, the construction industry is facing a labour crunch as a wave of retirements for metal sheet workers, brick layers and electricians are not being offset by enough new talent flowing into the industry, Moffatt points out.
“We’re having trouble keeping up with those waves of retirements, let alone expanding the sector. So there’s all kinds of bottlenecks here that’s going to make this difficult,” he said.
“But what the CMHC is telling us is that we need to try and we need to take the shortage seriously or else an entire generation of Canadians is going to get priced out of their homes.”
The CMHC report also noted, however, that ramping up construction is not the only way to augment supply. With a growing proportion of elderly households in Canada, embracing multi-generational homes would also ease demand pressures.
Ab Iorwerth said cities need to embrace this kind of “innovation” that could see underdeveloped lots such as retail buildings repurposed for higher density housing.
Moffatt agrees. He told Global News from his single-family home in Ottawa that it would currently be illegal to tear down his house and build a duplex or triplex to accommodate multiple families, but municipal zoning needs to catch up to the need for this kind of intensification.
“We need to find a way to get more of these homes built in our preexisting cities with preexisting infrastructure,” he said.
Should the Broadway corridor become a high-density zone?
Just because these are lofty goals doesn’t mean they’re impossible, Moffatt added. He pointed to the post-World-War-Two era, when Canada saw a flurry of homebuliding activity to house veterans returning from overseas, as a time when the country rose to such a daunting challenge.
While the CMHC analysis did not factor in any possible boost to construction activity driven by the federal government’s $400-million Housing Accelerator Fund announced in the 2022 budget in April, ab Iorwerth said Thursday he has “high hopes” for the program as a strong incentive to increase the pace of building in Canada.
If Canada is going to succeed in returning to housing affordability levels seen two decades ago, it will be an “all-hands-on-deck effort” that sees municipal, provincial and federal governments align on the need to hike supply.
“It’s everybody working together, the government, all orders of governments, the private sector, and really trying to get our act together on improving housing supply. It’s a large number. It’s going to be difficult,” he said.
— with files from Global News’s Kyle Benning
B.C. housing inventory lacking supply of affordable homes
© 2022 Global News, a division of Corus Entertainment Inc.
Canada's economy slows unexpectedly in May after April growth – The Globe and Mail
Canada’s economy slowed unexpectedly in May, according to preliminary data from Statistics Canada, but economists don’t expect this to deter the Bank of Canada from pushing ahead with an oversized interest rate hike in July to try to tame inflation.
Data published by Statscan on Thursday estimate Canada’s gross domestic product fell 0.2 per cent month over month in May, with output declines in mining, energy, manufacturing and construction sectors. That follows a solid 0.3-per-cent GDP gain in April. The preliminary May estimate will be finalized next month.
“The projected decline in May is both surprising and concerning,” wrote Andrew Kelvin, the chief Canada strategist at TD Securities, in a note to clients. “Q2 growth is still on solid footing overall, but if the slowdown in May lingers into June it will raise fears that the economy is slowing sooner than anticipated.”
Despite the drop, most Bay Street economists expect the central bank to proceed with a 0.75-percentage-point interest rate hike on July 13. Inflation hit a 39-year high of 7.7 per cent in May, and the bank has said it is prepared to act aggressively to bring it back down, even if that means significantly tamping down economic growth. Higher interest rates are designed to cool demand to bring it back in line with the economy’s supply capacity.
“Despite the surprise decline in May’s advance GDP the economy is still running firmly above long-run capacity limits, evident by decade-low unemployment rates. And inflation remains uncomfortably high at levels well above central bank’s target,” wrote Claire Fan, an economist with Royal Bank of Canada, in a note to clients.
“We expect growth to slow more significantly as the year progresses as high inflation and rising borrowing costs [bite] more into households’ spending power.”
The economy grew at a respectable clip in April, led by a 3.3-per-cent surge in mining and oil and gas output. Oil sands extraction grew 5.6 per cent that month, the largest monthly increase since September, 2020.
High-contact services also continued to gain ground with the lifting of pandemic restrictions. Air transportation jumped 20 per cent in April, while the accommodation and food services sector expanded 4.6 per cent. Arts, entertainment and recreation activity increased 7 per cent, with an assist from sports fans.
“The Toronto Raptors qualified for the NBA playoffs this year, playing late into April in their home arena in front of full crowds for the first time since winning a championship in 2019. Additionally, a number of minor hockey leagues extended their seasons into April to complete postponed games due to lockdown-related restrictions earlier in the year,” Statscan noted.
At the same time, higher borrowing costs are rapidly becoming a drag on the housing market. Real estate activity contracted 0.8 per cent in April, the largest monthly decline in two years. Activity at the offices of real estate agents and brokers fell 15 per cent that month. This followed Bank of Canada interest-rate hikes in March and April, as well as a sharp repricing in bond markets, which has pushed mortgage rates higher in recent months.
The preliminary data for May shows a retrenchment in energy, mining and manufacturing activity. Stephen Brown, the senior Canada economist with Capital Economics, suggested this dip may be short-lived.
“Amid elevated commodity prices and cuts to supply elsewhere, we would be surprised if activity in the mining, oil and gas sector failed to bounce back in June. Likewise, as there are now signs that global product shortages are easing, manufacturing activity should also rebound over the coming months,” he wrote in a note to clients.
Thursday’s data put the Canadian economy on track to grow about 4 per cent on an annualized basis in the second quarter. That’s below the central bank’s most recent estimate but above many other advanced economies, which are feeling the pinch of higher commodity prices and supply chain disruptions caused by the war in Ukraine more acutely.
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Pandemic travel: How Canadian airlines are reducing flights – CTV News
Two of Canada’s largest airlines announced steps to cope with delays, cancellations and service issues.
On Wednesday night, Air Canada said it would be making adjustments to flights over the next two months in order to address “customer service shortfalls.” And on Thursday, WestJet reaffirmed its taking a “very measured” strategy in order to maintain services this summer.
Here’s what the two airlines have announced.
Air Canada sent an email to customers on Wednesday night announcing a reduction in flights the airline will be offering in July and August.
In an emailed statement to CTV News Channel, an Air Canada spokesperson said the company will be reducing its schedule by an average of 154 flights per day for July and August. Before this, Air Canada said it was operating around 1,000 flights per day.
The company said the routes most affected are flights to and from hubs in Toronto and Montreal. Air Canada will be reducing the frequency of these flights over the summer, primarily affecting evening and late-night flights on the airline’s smaller aircraft.
Air Canada is also suspending three routes this summer. The spokesperson said the airline will temporarily suspend routes between Montreal and Pittsburgh, Baltimore and Kelowna, and Toronto and Fort McMurray.
International flights will remain mostly unaffected, except for timing changes that the spokesperson said would reduce flying at peak times and improve the flow of passengers to these destinations.
While Air Canada President Michael Rousseau acknowledged in the email to customers this will have a “negative impact” on some passengers, he said he hopes giving this notice will allow travellers to make other arrangements for their summer travel plans.
In a statement posted on its website on Thursday, WestJet said it would also be operating fewer flights in order to ensure the company “can deliver a stable operation.”
WestJet says it will be operating 25 per cent fewer flights this summer, dropping its services from an average of 700 flights per day to an average of 530 flights per day.
The statement from the airline also says the company is conducting “extensive planning” to ensure its flights are “all flying in peak performance.”
Air Canada Cutting Back Summer Flights to Deal with High Airport Traffic – VOCM
Air Canada is cutting schedules through July and August in order to reduce passenger volume in light of a series of flight delays, cancellations and general chaos in the airline industry.
Reports indicate that more than half of flights at some Canadian airports have been cancelled or delayed. While the phenomenon is being experienced throughout North America, some of the worse scenarios have played out at Toronto Pearson. The situation is so bad, federal Transport Minister Omar Alghabra has called the baggage chaos experienced at Canada’s busiest airport “unacceptable.”
President and Chief Executive Officer of Air Canada, Michael Rousseau says the surge in travel has created unprecedented and unforeseen strains on all aspects of the global aviation system.
Recurring flight delays are being experienced around the world, says Rousseau, resulting in airport congestion and a “complex array” of persistent factors affecting airlines and their partners. Rousseau says the result has been flight cancellations and customer service shortfalls for which they “sincerely apologize.”
He says the schedule reductions through the busy summer months are intended to help reduce traffic volumes even though they will result in further flight cancellations affecting travellers.
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