Political leaders, especially at the provincial level, have focussed their attention on two related factors that they can control through legislation. First, they argue that local planning processes and regulations slow down approvals and drive up the costs of housing. Second, they say, NIMBY (not in my backyard) attitudes from residents limit density and slow down approval processes.
Those who study the history of housing in Canada identify inadequate government commitment and coordinationover the last several decades as a key factor in the contemporary problem. With governments at all levels largely out of housing production, housing starts fell far short of demand (driving prices up). In many cities, the supply of affordable social housing units contracted as local authorities lacked the financial resources to repair them. Some affordable options — such as single-room occupancies for low-income individuals — decreased in numbers as governments dismissed them as not offering ‘the standard of housing we want to see.’
Today, land ownership around most cities is controlled (or optioned) by a small number of local firms, some of whom have the ear of government to obtain favourable treatment. Because land is a finite good, the firms that control it have little incentive to release it at a rate that would bring prices down. If they hold the land longer, they may convince governments to increase permitted densities and thus enhance returns. Hence, developers have not built tens of thousands of already permitted units, waiting instead for future opportunities.
Housing has long been seen as a vehicle for household wealth accumulation, but as interest rates fell in the wake of the financial crisis, it offered a secure investment opportunity for pension funds, insurers, and real estate investment trusts. Small-scale housing projects increasingly gave way to large-scale, high-rise towers. Companies often bought affordable apartment properties, evicted tenants for renovations, and then relet units at higher rents. During 2022 and 2023, investors bought a significant proportion of homes sold, contributing to escalating prices: in some cases, they turned single-unit homes into multiple-unit accommodations.
Despite the growing value of the real estate sector, housing starts failed to keep up with demand. In 1976, CMHC reported over 273,000 housing starts for a population of under 24 million; in 2022, only 240,600 housing starts served a population of nearly 40 million. In 2023, at a time of increasing demand, CMHC reported a decline in housing starts. Industry analysts blamed high interest rates and significant construction labour shortages for the decline. By some accounts, Canada is short 80,000 construction workers and faces more retirements in the next decade.