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CMHC says regulations, 'fragmented' construction sector weigh on housing starts

A recent study by Canada's national housing agency reveals that restrictive regulations and a fragmented construction sector are hindering housing starts in the country. The analysis, published by the Canada Mortgage and Housing Corporation (CMHC), indicates that Canada has the potential to build over 400,000 homes per year. However, in 2023, only 240,267 housing starts were recorded.

Mathieu Laberge, CMHC's senior vice-president of housing economics and insights, explains that this potential is based on the construction productivity levels seen in the early 2000s and the current performance of cities like Calgary, Edmonton, and Vancouver. Despite a growing shortage of construction labor, with approximately 650,000 workers in 2023, Laberge believes Canada could significantly increase its housing starts.

The study suggests that regulations at the municipal level are a major obstacle. Permit processes, restrictions on building height and density, and development charges are all cited as barriers to faster development. Laberge points to recent zoning reforms in British Columbia, which aim to allow for more housing density, as an example of positive regulatory change.

Furthermore, Laberge argues that the fragmented nature of the construction industry, where 69% of businesses have fewer than five employees, also impedes progress. This fragmentation limits investment in research and development, efficient recruitment, and resource management. Consolidation in the industry could generate economies of scale and potentially lower construction costs.

The federal government recently announced a plan to build 3.87 million new homes by 2031, calling on all levels of government to collaborate and create incentives for housing development. Laberge believes this goal is achievable if regulatory and industry reforms are implemented swiftly.

"Structural changes take time," Laberge noted, emphasizing the need for immediate action to address these barriers and meet future housing demands.



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