Canada Isn’t Building Enough Homes — and the Problem’s Worsening

As Canada’s working-age population balloons, economists are concerned about the country’s ability to produce enough housing to meet higher demand.

By Josh Sherman | 2 minute read

For years, economists have been saying the rate of homebuilding in Canada is falling far behind demand, and recent research suggests the gap is only widening.

In a brief published last month, National Bank Chief Economist Stéfane Marion compares population and homebuilding trends to prove his point. Canada’s working-age population swelled by 204,000 people over the first quarter of this year, he notes (this cohort includes those aged 15 to 64). That’s more than the U.K.’s working-age population increased during all of 2022. “Unfortunately,” writes Marion, “Canadian homebuilders are unable to keep up with this population surge.”

National Bank estimates that housing starts, a measure that represents when work begins on residential buildings, reached just 57,000 units over the same three-month period. Based on that number, the ratio of housing starts to working-age population growth is 0.27, suggesting contractors break ground on just one home for every four people that join the working-age population. Marion notes that it’s normal for population growth to outpace homebuilding to some extent — on average, Canadian households are made up of 2.4 people on average, according to 2021 census population data — but the current ratio is considerably lower than the historical average of 0.61.

“The lack of new housing starts in the face of very strong population growth will continue to put pressure on housing affordability in the coming quarters,” says Marion. “Ottawa should consider revising its immigration targets to allow supply to catch up with demand,” he adds.

Canada added 431,645 new permanent residents in 2021, an all-time high, and the federal government plans to welcome 500,000 newcomers a year by 2025. 

Putting Canada’s Homebuilding Shortfall on the World Stage  

Marion’s data exercise builds on previous research that looked at how Canada stacked up to several other countries for homebuilding. A Scotiabank report from 2021 noted that Canada had the lowest population-adjusted housing stock in the G7. “Our conclusion is clear: housing construction has not kept up with demand and, when looking at international comparisons, the shortage of supply is even more sharply evident,” wrote Scotiabank Chief Economist Jean-François Perrault in the report. 

Canada had 424 housing units for every 1,000 people as of 2020, down from 427 in 2016, according to the report. “An extra 100,000 dwellings would have been required to keep the ratio of housing units to population stable since 2016 — leaving us still well below the G7 average,” Perrault pointed out.

The closest country to Canada in terms of housing supply on a per capita basis was its neighbour to the south. In the U.S., there were 427 residential units per 1,000 residents. France was far and away the leader, with 540 homes per 1,000 residents. (Italy, another G7 nation, was excluded from the exercise because of data limitations, according to Scotiabank. ) “The insufficiency of supply is clear at any horizon,” noted Perrault of the situation in Canada. “It reflects a long-standing under-production of housing, whether for rent or purchase.”