Canada will need to invest more than US$210bn a year to meet its housebuilding targets, according to a report from policy thinktank, the Fraser Institute.
The housing market is suffering from an affordability crisis caused in part by a lack of supply.
In response, the government has published its Canada Housing Plan, which it describes as “a bold strategy to unlock 3.9 million new homes by 2031”.
But the Fraser Institute says this will require Canadians to save and invest much more than they presently do.
Steven Globerman, a senior fellow at the institute and the report’s author, said: “To increase home building and restore business investment in key areas like technology to previous levels, Canada needs to become much more attractive to investors, both from within Canada and around the world.”
In addition to the housing sector, the report noted that for business investment in industries such as communications and IT to return to previous levels, another US$9bn would be necessary.
In total, the financing gap ranges from US$240bn to US$263bn a year. To meet that shortfall, Canadians would have to increase the amount they save by 50%.
The report suggests that this would be unrealistic, which means that the success of the initiative would depend on the country’s ability to attract foreign investment, which in turn would require policy reforms to attract investors.
Policy alternatives
The report concludes with some policy suggestions, which are in line with the Fraser Institute’s libertarian–conservative philosophy.
These include increasing consumption taxes and reducing income and corporate rates to encourage saving.
Another suggestion is to reduce public sector spending, thereby shrinking government borrowing, since this reduces the funds available to private sector companies, who are, according to the institute, able to borrow and invest more efficiently than the government.
A third suggestion is to reduce “the regulatory state” since “the regulatory burden can arguably be substantially reduced without necessarily compromising legitimate public policy objectives such as reducing harmful environmental externalities”.
Topping the policy agenda
CMP, a website specialising in mortgage-related matters, notes that housing matters are near the top of Canada’s political agenda.
It writes: “During the first debate of the ongoing election campaign, Ontario premier Doug Ford faced criticism for missing his 2022 pledge to build 1.5 million homes in the province.
“Ontario’s housing starts fell by 16% in 2024, leaving the province well behind its target of 125,000 new homes a year. Opposition leaders, including NDP leader Marit Stiles, Liberal leader Bonnie Crombie, and Green Party leader Mike Schreiner accused Ford of prioritising developers over residents and failing to deliver on housing targets.”
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