Federal plan to increase housing likely to face challenges: study
The newly unveiled federal government plan to build millions of homes over the next few years is likely to face significant economic headwinds, a new study has predicted.
TD Economics examined the initiative, called Canada’s Housing Plan, to build 3.87 million homes in Canada by 2031.
It said these supply-side goals “are perhaps the boldest” parts of the new federal plan, which also has measures to help buyers afford homes more easily.
TD further argued that the plan is calling for a pace of building well above the historical average. As such, the goal of constructing nearly four million homes will be challenging, particularly amid elevated interest rates and capacity constraints for labour, land and materials.
The bank indicated the federal initiative aims to increase the number of homes in Canada built over the next seven years by two million, compared with the 1.87 million that would have been constructed based on a recent forecast from Canada Mortgage and Housing Corp.
To make the federal plan work, Canada’s homebuilding industry would need to average about 550,000 starts annually versus the existing average of about 242,000 units annually.
The all-time high for annual starts in Canada, TD noted, is 270,000.
A main challenge to more than doubling starts will be finding skilled workers.
TD pointed to the labour market already being tight, with construction workers presently making up a little less than eight per cent of Canada’s total workforce, a historic high.
Moreover, the study highlighted that skilled workers in the sector are aging, with 20 per cent aged 55 and older.
The report did point out that the federal government plan to increase training and recognition of existing credentials from other jurisdictions should help increase the labour pool.
Yet other parts of the plan will also face challenges. That includes the $6 billion the feds are setting aside for provincial and municipal governments for critical infrastructure, with the aim of unlocking surplus land and increasing densification.
Already, there has been pushback as the federal government has made deals directly with cities, which some provincial governments consider an overstep of the feds’ constitutional powers, TD added.