Government must pull strategic levers to solve Canada’s housing crisis

Dive into the pressing issue of Canada's housing crisis and explore collaborative solutions for a more sustainable future.

In brief

• Across Canada, appropriate and affordable housing is hard to find.
• Addressing the crisis effectively requires all stakeholders to view housing as a connected ecosystem.
• With that perspective, governments can work collaboratively, pulling strategic levers that allow public and private actors to influence positive change.

Housing in Canada presents one of the most significant challenges our generation has seen. The present crisis threatens the economic engine that drives Canada, and the promise of prosperity and opportunity that fuels immigration from around the world.

The housing sector also presents one of the most profound opportunities for Canada to be a leader on the global stage as to how all levels of government and the private sector can collaborate on innovative and efficient means of delivering more housing across the spectrum of affordability.

At EY, we’ve assembled a team of industry advisors who bring experience and appropriate perspectives to this dilemma. Through a series of points of view, we will share our big and bold ideas on how we can turn this crisis into an opportunity by using creative and leading levers. 

How can governments influence the housing ecosystem?

Solving Canada’s housing crisis is critical to restoring affordability. It’s also part and parcel of fostering a national landscape in which home ownership is once again an attainable goal, and appropriate and affordable housing is accessible at every life stage. To get there, governments must understand the role and influence they hold in the housing ecosystem. The majority of housing is built by the private sector, but public legislation, regulation and policy impact the market’s ability to meet demand.

Affordability and quantity are major factors in the housing crisis. Canada’s annual population growth from 2013 to 2022 was approximately 450,000 people. Over that same period, only 200,000 units of housing were built — the same amount per year as the 1970s. In the ’70s, however, a home was built for nearly every additional Canadian resident, while in the 2010s only one home was built for every two.¹

Across the country, the price of housing grew by over 40% between January 2018 and November 2022.² In Toronto and Vancouver in October 2023, the average household income required to purchase a single-family home was over $230,000 and $248,000, respectively.³ . According to StatsCan, “The growth in renter households (+21.5%) was more than double that of owner households (+8.4%) from 2011 to 2021. Renters were also over twice as likely to be in unaffordable housing as owners.”⁴

And the challenge isn’t confined to these major cities. The housing crisis stretches right across Canada. This unaffordability has negative ripple effects across communities. For example:

• Middle- and high-income households cannot afford to purchase, creating a situation in which incomes allow people to rent, at higher prices, units that would otherwise have been affordable to lower-income tenants if higher-income households were not in the rental market.
• Expensive market housing places greater demand pressure on social housing providers, homelessness supports and rent subsidy programs. This makes it challenging for vulnerable tenants to gain access to housing supports — or for those in public housing to move “up and out” into market homes. In expensive markets, the gap between subsidy and market rents becomes quite simply insurmountable for too many Canadians.

To succeed, we call on parties from across the housing ecosystem to come together and:

1.    Understand Canadians’ unmet housing demand. The Canada Mortgage and Housing Corporation (CMHC) believes Canada needs at least 3.5 million more homes by 2030 to restore affordability.⁶ What is less clear is the distribution of that housing. For example, a suburban development in rural Manitoba would have no effect on the rental crisis in downtown Vancouver. Currently, the most popular and economically productive cities fail to allow housing to be built at a pace that meets the demand to live in those places, resulting in high prices and rents. Many also restrict where multifamily homes can be built or, through regulation, make it too expensive to build “missing middle” housing such as triplexes and bungalow courts. A deeper dive into unmet demand will help both governments and builders understand where Canadians want housing.

“Developers are anxious to help address the unmet demand for affordable housing and are willing to explore innovative and bold ideas in partnership with all levels of government,” says Zach Pendley, Partner & Real Estate Transactions Leader, EY Canada. Market conditions today will require even greater levels of collaboration to understand both the demand for housing but also the challenges faced in delivering on those housing needs.

2.    Build more, and more diverse, forms of housing. In Canada today, only two kinds of new housing tend to be built: single-family homes and large multifamily options, typically condominiums. But trying to solve the housing crisis by continuing to build the same kinds of homes won’t address Canadians’ diverse and dynamic needs. These needs range from young people moving out for the first time to retirees looking to downsize in their own communities.

Reforming zoning to open more land to multifamily homes, making “missing middle” housing economically viable again, investing in single-room occupancy and student housing among other housing forms will better meet demand and give Canadians the freedom to access more appropriate and affordable shelter.