Canada’s Housing Policy Has a Measurement Problem

If Canada measured outcomes, we’d have better policy

For the second time in three weeks, Mike will be a witness before the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities (HUMA), speaking on housing. This time, Mike will be talking about the committee’s study on Housing Starts in Relation to Federal Programs. Mike’s opening remarks are below.

Thank you for having me here today.

The federal government has set an ambitious target of reaching 500,000 annual housing starts by the year 2035. An ambitious target is admirable, but it is no substitute for a goal.

A housing target is a means, it is not an end. It is not a goal. A young family in search of a home does not care how many housing starts there were last year; they care about finding a home they can afford in their community that meets their needs.

Canada’s lack of a middle-class housing goal creates a policy vacuum that the Office of the Federal Housing Advocate has attempted to fill with a recent report advocating a 2060 target to address the middle-class housing crisis. That goal, if adopted, would cement a future of intergenerational inequality for Generations Z, Alpha, and Beta, threatening to tear apart the country’s social and economic fabric.

The federal government needs a housing plan with a clear goal, with a reasonable time frame, and a set of quantifiable objectives, such as “every middle-class, dual-earner couple in their 30s should be able to afford to purchase or rent a new, entry-level home, in any community in the country, suitable for a household of five, by 2035.”

The purpose of such a goal is not for the federal government to engage in central planning, deciding where homes are built and at what price. Rather, it is to set up the conditions for success; to understand what is working well in the current housing system, and what requires improvement. Defining a clear goal clarifies the tradeoffs in public policy, ensuring optimal value-for-money.

And, most importantly, a clear goal should be based on the attainability of new housing. Governments should not be in the business of trying to manipulate resale home prices. Rather, it should be about ensuring that builders can create suitable options that families can afford, that the market can respond to changing conditions, such as unexpected population increases, and that governments fill in the gaps with below-market-rate housing where necessary.

Multiple objectives, with intermediate targets, are needed. A simple target of 500,000 homes by 2035 says nothing about the size of the homes, where they are located, how attainable they are, or what the path to get there will be.

And that path is important. Achieving that simple 500,000 start target is becoming increasingly out of reach, as the CMHC projects housing starts to decline over the next three years, falling below 220,000 units in 2028.

This decline can be reversed, but only if the federal government develops a clear plan of how it will achieve that target, linking policy reforms to outcomes.

Take Build Canada Homes, for example. The federal government’s flagship program lacks key performance indicators and accountability measures. We do not know, and have not been told, how many housing starts this program will contribute to each year.

Finally, a word of caution about the housing start metric. Unlike our global counterparts, the CMHC does not record a project in their housing start data until the foundation meets grade. It is a poor real-time indicator of the health of the housing construction sector, as it reflects investment decisions made anywhere from one to three years before a start is recorded. The CMHC should also consider tracking excavations, as the U.S. and Australia do, to provide a better real-time indicator of new construction activity.

Thank you for your time.