(Bloomberg) — Canada’s housing minister has a daunting target in front of him as his government tries to rein in skyrocketing housing prices: doubling the pace of housing construction in the country within 10 years.
But Ahmed Hussen, who was appointed to the job after last year’s election, says Canada doesn’t have a choice if it wants to keep expanding its economy and attracting skilled immigrants.
“The issue of housing supply is critical to our future success as a country,” Hussen said in an interview with Bloomberg.
Canadian housing prices were already high before the pandemic before rising by more than 50% in the past two years. The price surge has become one of the top political issues in the country.
There’s significant debate about what’s driving it, with limited housing supply, a high level of immigration, investor activity and extremely low interest rates all cited as factors. But with younger families increasingly priced out of owning a home in most large cities, affordability has become a major problem for Prime Minister Justin Trudeau’s Liberal government.
His political rivals are turning their attention to it. Pierre Poilievre, the front-runner in the leadership race for the opposition Conservative Party, posted a video on Twitter this week that slammed the cost of housing and blamed the Liberals’ spending record, as well as municipal government “gatekeepers.”
Boosting supply was the centerpiece of the housing plan laid out in the Trudeau government’s spring budget. It said Canada has averaged around 200,000 new housing units annually in recent years and pledged to “double our current rate of new construction over the next decade.”
The plan quickly prompted skepticism from analysts. “Dollars to doughnuts this won’t happen, and not for lack of good intentions,” Robert Kavcic, senior economist with the Bank of Montreal, wrote this week in a note to investors.
Kavcic pointed out that housing completions are already running at the highest level since the 1970s, skilled labor in the building industry is scarce, and municipal governments will fight any effort to zone for more density.
Avery Shenfield, chief economist at CIBC World Markets, also doubted the feasibility of the plan given labor constraints.
“Without a targeted immigration plan, or a concerted effort to convince young residents to consider taking up a hammer rather than a laptop, we’re going to continue to struggle to ramp up supply enough to allow more Canadians to own their own castle,” he wrote Thursday.
Hussen said he knows this skepticism is out there, but argued his government has already shown it can deliver on ambitious programs. Last year the Liberals pledged to get every province to sign on to a universal child care program, and they got the final piece in place last month when Ontario agreed.
“Skepticism can be expressed, but the fact is we have shown a track record and an ability to build and collaborate with other orders of government,” he said.
The biggest new housing measure in the budget is a C$4 billion ($3.2 billion) Housing Accelerator Fund that municipal governments can tap in exchange for taking measures to boost home supply.
Hussen said the details of how the fund will work were still being finalized, but it has two main objectives.
First, local governments applying for the money will need to create “road maps” on how to overcome obstacles preventing them from building more housing. Second, the money can be used to speed up project approvals by digitizing records or hiring more workers to handle permit and zoning requests.
Hussen emphasized that this money won’t flow to a municipality simply based on its population.
“You have to demonstrate the political will to tackle those barriers,” Hussen said of municipalities. As examples, he pointed to zoning changes to allow for more density near transit stations and requiring affordable housing in new developments.
“If they’re not willing to do any of those, or even present a credible plan to tackle these barriers, then we simply will not engage,” Hussen said. “But I believe that all municipalities will welcome this,” he added. The program has support from the Federation of Canadian Municipalities and the big city mayors’ caucus, Hussen said.
As for labor shortages, Hussen argued investments in skills training and immigration can help with this. “Immigration is one of the tools to address the lack of adequate housing supply, because many skilled immigrants are coming in through our smart immigration policies to help us build , literally help us build our country,” he said.
The budget promised other items to boost supply, such as tying federal infrastructure money to requirements around housing and putting another C$1.5 billion into a fund for affordable-housing projects.
Ultimately, Hussen said his government has limited tools to use for housing, since much of the power over housing belongs to provincial and municipal governments. “What we’re responsible for is to provide leadership to have a national approach, a national plan to tackle the affordable housing challenges faced by Canadians,” he said.
He said he believes the money in the budget is enough to get substantial action under way at the local level.
“We’re not just asking them to do this,” he said. “We are putting significant resources on the table to incentivize them to do so, and invest in their capacity and their ability to build more housing supply and build it fast. “
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