Canada’s housing target falls 1.5 million units short, CIBC says

Canada is facing a significant housing challenge, with the current target falling short by 1.5 million units, warns Canadian Imperial Bank of Commerce (CIBC). The nation's housing agency asserts a need for an additional 3.5 million homes by 2030 to tackle the affordability crisis. However, CIBC economist Benjamin Tal argues that the actual requirement is closer to 5 million homes. The root of this miscalculation, as outlined in Tal's recent report, lies in the inadequate consideration of non-permanent residents in population figures.

The housing issue has become a focal point for political debates, as Prime Minister Justin Trudeau's government grapples with soaring housing costs nationwide. Despite implementing various policies to boost housing supply, the impact on the market has been limited. The attempt to stimulate economic growth through increased immigration has inadvertently exacerbated the supply-demand imbalance.

Factors such as high interest rates and a slowing economy pose additional challenges to the government's efforts to address the housing shortage. In December, Statistics Canada reported a 14% month-on-month plunge in the total value of building permits, reaching the lowest level in over three years. Residential permits, in particular, experienced a sharp decline of 17.9%, largely attributed to a significant drop in multi-unit permit construction intentions.

A considerable portion of Canada's recent population growth has been driven by non-permanent resident programs, such as foreign students and temporary workers. These programs, not subject to caps until recently, have been propelled by demand from educational institutions and employers. Despite the introduction of a cap on the number of foreign students, CIBC's Tal emphasizes that other types of non-permanent residents will still contribute to approximately 2% annualized population growth, equivalent to 6 million new people over the next seven years.

Tal criticizes the lack of credible forecasts, targets, and capacity plans for non-permanent residents across various levels of government. He calls for a change, stating, “Meaningful forecasting, targets, and integrated planning must be conducted for all permanent and temporary visa approvals to be meaningful.” He stresses the necessity of considering both permanent and temporary residents in planning to bridge the existing shortfall.

In response to the concerns raised by CIBC, Immigration Minister Marc Miller acknowledges the immediate public policy implications of recent migration surprises. He concedes that the government "could do a better job of dealing with the aggregate numbers so people know what they’re solving for." However, Miller contends that even with more predictable population forecasts, adjustments may not be automatic, as political decisions are often driven by fulfilling promises rather than long-term projections.

As the housing crisis deepens, there is a growing consensus that a comprehensive and forward-looking approach is essential to address the root causes and ensure the development of effective solutions. The call for better planning, forecasting, and targets for both permanent and temporary residents underscores the urgency of a coordinated effort to meet Canada's housing needs.