Strategies for Solving Canada's Housing Dilemma: Paving Ways for a Flexible Real Estate Sector
Canada's housing market is grappling with persistent affordability challenges, supply shortages, and regulatory complexity. To address these issues, a collaborative effort is needed among government, developers, lenders, and property owners to create a more efficient and inclusive housing ecosystem.
The Canada Mortgage and Housing Corporation (CMHC) plays a crucial role in this endeavour, implementing the federal National Housing Strategy and providing mortgage loan insurance. The CMHC also supports both renters and homeowners through various tax incentives and programs.
One suggested strategy is the formation of cross-sector "solver" communities, bringing together government agencies, private innovators, developers, lenders, and property owners to share expertise and accelerate housing innovation. This approach has been exemplified by the Housing Supply Challenge’s “Level-Up” round in Canada.
Another strategy involves streamlining and aligning policies and regulations across federal, provincial, and local governments. This would reduce duplicative inspections, shorten project timelines, and harmonize affordable housing programs, thereby reducing costs and administrative burdens for developers.
Expanding financial incentives and funding mechanisms is another key strategy. Raising state housing credit ceilings and enhancing Low-Income Housing Tax Credits (LIHTC) could provide more predictable and robust capital for affordable housing development.
Empowering governments to use state preemption or direct permitting is another approach to overcome local opposition and accelerate approvals in jurisdictions undersupplying housing. This would provide property owners with clearer rights to challenge unnecessarily restrictive zoning rules.
Better coordination and data sharing among government levels and market actors are also essential to guide policy, monitor progress, and support evidence-based housing investments and development practices.
In addition, legislating housing as an essential service could provide policy certainty and stability for long-term investment and planning. Provinces, particularly Ontario, play a central role in shaping housing policy and legislative frameworks.
Granting fee simple title to First Nations reserve land could unlock significant economic opportunities, support infrastructure development, and advance economic reconciliation. Introducing a sliding scale mortgage interest tax deduction based on household income is another strategy under discussion.
Accelerating sustainable building practices through prefabrication and eco-friendly materials is also a crucial strategy. Policymakers are encouraged to adopt a balanced approach that supports development while safeguarding community interests and sustainability objectives.
The federal government's involvement in the housing market is generally limited to providing funding through programs like the Housing Accelerator Fund and implementing the National Housing Strategy and Plan. Converting office towers to mixed-use developments is another strategy under discussion.
Municipalities are responsible for executing provincial policy through official plans, zoning by-laws, and planning approvals. They are on the front line of optimizing land use and accelerating the supply of affordable housing. Facilitating multi-residential densification through regulatory change could increase supply in established neighborhoods.
Financial innovation through fractional co-ownership for first-time buyers could lower the barriers to entry for aspiring homeowners. Investor ownership is substantial, with 20-30% of housing stock held by investors. In Ontario, 42% of condominiums are investor-owned, compared to 15% of single-family homes. In Toronto, approximately 50% of condominiums are investor-owned.
Estimates suggest that 3.5 million new housing units are required nationally within the next five years, with 1.5 million needed in Ontario alone. These collaborative strategies aim to unlock housing supply by reducing inefficiencies, increasing collaboration, leveraging innovation, and creating aligned incentives that support inclusive, affordable, and timely housing development across Canada’s diverse communities.
[1] Housing Supply Challenge: https://www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance/housing-supply-challenge [2] Streamlining Regulations: https://www.cmhc-schl.gc.ca/en/corporate/reports-and-publications/research-and-analytics/housing-market-assessment/housing-market-assessment-2019-03/hma-2019-03-01 [3] Financial Incentives: https://www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance/housing-market-insurance-programs/mip-programs/cmhc-insured-mortgages/mip-programs/mip-programs-for-social-housing-providers [4] State Preemption: https://www.cmhc-schl.gc.ca/en/corporate/reports-and-publications/research-and-analytics/housing-market-assessment/housing-market-assessment-2019-03/hma-2019-03-01 [5] Data Sharing: https://www.cmhc-schl.gc.ca/en/corporate/reports-and-publications/research-and-analytics/housing-market-assessment/housing-market-assessment-2019-03/hma-2019-03-01
The Canada Mortgage and Housing Corporation (CMHC) supports both renters and homeowners through various tax incentives and programs, such as the Housing Supply Challenge’s “Level-Up” round in Canada (1). Streamlining and aligning policies and regulations across federal, provincial, and local governments could reduce duplicative inspections, shorten project timelines, and harmonize affordable housing programs, thereby reducing costs and administrative burdens for developers (2).
