Canada Needs to Build 3 Million Homes in 10 Years to Solve the Housing Crisis
This number is lower than previous estimates, due to recent immigration policy changes
Highlights
Canada needs to build three million homes over 10 years, covering the beginning of 2021 to the end of 2030, to keep up with forecasted population growth and address the pre-existing shortage.
This estimate of three million homes is substantially lower than previous estimates, as changes to immigration and non-permanent resident policies will substantially reduce population growth.
Canada built one million homes between 2021 and 2024 and will need to build two million more over the next six years. Building 330,000 units a year will be extremely challenging, but bold policy reforms can make it achievable.
The more difficult problem is building the right type of homes. Over the past decade, Canada has transitioned to building small, high-rise apartments. While these were needed, there is a massive shortage of 3+ bedroom homes suitable to raise families with children.
Canada has had the lowest number of ground-oriented housing starts in any two-year period since 1966-67, contributing to the shortage of family-sized homes.
There are also large shortages of affordable non-market and below-market homes for low-income families.
Governments should reset their housing targets in response to reduced population growth. They should pivot away from the “unit is a unit is a unit” mindset and set targets for 3+ bedroom units and non-market/below-market housing.
Here at the Missing Middle, we’re frequently asked if federal reductions to immigration and non-permanent resident programs will solve Canada’s housing supply crisis alone. The answer is “no,” but those changes certainly reduce the number of homes needed.
Governments, along with the CMHC, have issued several housing targets over the years but have never been particularly transparent about how they calculate these figures. The most famous housing target in Canada is Ontario’s 1.5 million homes over ten years, covering 2022-2031. The CMHC released a Canada-wide estimate of 5.8 million homes, whereas the federal government released a figure of 3.9 million homes. The federal figure was always particularly frustrating because not only did they not indicate how they arrived at this figure, they also never indicated how many years the estimate covered, just that they were needed “by 2030”!
These estimates have become dated as the federal government has not only reduced annual immigration targets but also implemented several measures to reduce the number of non-permanent residents living in Canada from three million to two million. The federal government estimates that these actions will “reduce the housing supply gap by approximately 670,000 units by the end of 2027.” Once again, the federal government did not publish its methodology for arriving at this figure, but given the size of the changes, it is not an unreasonable estimate.
However, we can do better than a back-of-the-envelope guess on how many homes the country needs to build to keep up with population growth and pre-existing shortages. We can use the RoCA Benchmark method.
Canada needs to build three million homes over 10 years
The RoCA Benchmark method allows us to calculate pre-existing housing shortages based on Census data. The last Census was in 2021, so we will use that as our starting point. Using data from that Census, we find that Canada had a shortage of just over 690,000 homes, with two-thirds of that shortage occurring in the province of Ontario.
Figure 1. Canadian housing shortages by province as of 2021
Source: Canada Can Close the Housing Supply Gap by 2032
We can then use annual population growth data and Statistics Canada's population projections to calculate the number of homes needed to accommodate population growth from July 1, 2021, to June 30, 2031. Assuming those projections prove accurate, Canada will need to build just over 2.3 million homes to accommodate this population growth. Add the pre-existing shortage, and Canada will need to build three million homes over the decade to fully address the housing crisis.
Figure 2. Canada, cumulative demographic-based housing need, number of units, 2021 to 2031
Sources: Statistics Canada Tables 17-10-0005-01 and 17-10-0057-01.
The bend in the curve after 2024 clearly indicates the impact of the federal government’s policy changes. Had housing needs continued to grow at the 2021-24 rate, by 2031, Canada would have needed to build 5 million, rather than 3 million, homes to keep up with population growth and address pre-2021 shortages.
Because Statistics Canada's population projections are available at the provincial/territorial level, we can estimate the number of homes that will need to be built in each province/territory through 2031. Ontario’s estimate is almost exactly 1.4 million homes, suggesting that the province has room to lower its 1.5 million-home target in light of federal immigration policy changes. In the past, we have suggested that the provincial target was too low, estimating that the province will need 1.7 million homes, but those policy changes, particularly the ones related to international students and other non-permanent residents, have reduced this estimate by over 300,000 homes.
Figure 3. Cumulative demographic-based housing need by province and territory, number of units, 2021 to 2031
Sources: Statistics Canada Tables 17-10-0005-01 and 17-10-0057-01.
Over the last four years, from the start of 2021 to the end of 2024, Canada has had just over one million housing starts. Canada will need two million more housing starts over the next six years, or roughly 330,000 homes per year, to hit this 2031 target.
Figure 4. Canada, cumulative demographic-based housing need, number of units, 2021 to 2031, and number of housing starts, in units, 2021 to 2025
Sources: Statistics Canada Tables 17-10-0005-01, 17-10-0057-01 and 34-10-0126-01.
We believe Canada can build this many homes under the right conditions, but we should not underestimate the scope of the challenge. Over the last 60 years, Canada has averaged 200,000 housing starts a year and has never exceeded 275,000 in any single year. Current conditions are far from ideal, from the ongoing Trump tariffs to slow economic growth to the evaporation of the GTA’s pre-construction condo market. It will take substantial reforms, along with good luck, to build this many homes.
Figure 5. Housing starts by year and type in Canada, number of units
Sources: Statistics Canada Table 34-10-0126-01.
An even bigger challenge will be in building the right type of homes. In our piece, Young Families are Leaving the GTA in Search of Family-Sized Homes, we showed how the shortage of 3-bedroom homes was particularly acute, causing families to scatter across the country in homes suitable for raising a family with children. This shortage of family-sized homes is due to a combination of unusually rapid population growth along with the decline in the construction of ground-oriented housing. While apartment starts are at all-time highs, which was needed to keep up with population growth and to address underbuilding in the 1990s, ground-oriented housing, which includes single-detached, semi-detached and townhouses/row housing, has had its worst two-year period for starts since 1966-67.
Figure 6. Housing starts by year and type in Canada, number of units
Sources: Statistics Canada Table 34-10-0126-01.
Of course, there is a massive need for various forms of social housing. However, as a recent Parliamentary Budget Office report makes clear, while all governments have made impressive-sounding commitments to building various types of non-market housing, the number of units completed each year remains stubbornly low.
In Summary
Canada needs to build three million homes over the next decade, and Ontario needs to build 1.4 million homes to keep up with population growth and to address pre-existing shortages.
This estimate is substantially lower than previous estimates, as federal changes to immigration and non-permanent resident policies have substantially reduced housing needs.
To hit the three million unit target, Canada will need to start 330,000 housing units per year over the next six years. The number has never exceeded 275,000. A scale-up of this magnitude will require a war-time-like effort, but it is possible.
The larger challenge will be building the right types of units. Over the last decade, Canada has largely shifted to building apartment units with two bedrooms or fewer. This has left the country with a massive shortage of three- and four-bedroom units suitable for raising a family with children.
More apartment units are needed, but we can not studio condo our way out of this crisis.
Despite impressive-sounding announcements from three orders of government, social housing completions remain stubbornly low, creating real shortages, particularly for lower-income families.