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Although residential construction grew in Canada last year, the number of homes being created has still struggled to keep up with the rising population within the country’s biggest cities.
The Canadian Mortgage and Housing Corporation (CMHC) recently published its Housing Supply Report, which analyzes current housing supply trends in Canada’s six largest Census Metropolitan Areas (CMAs) — Toronto, Montreal, Vancouver, Calgary, Edmonton and Ottawa.
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One of the major findings from the report shows that housing starts have struggled to keep pace with population growth in some regions, particularly in Toronto. This trend, CMHC said, could adversely affect centres like Toronto and Vancouver where there are major affordability challenges present.
“The number of housing starts was high in several census metropolitan areas in 2021, compared to the average of recent years,” said Eric Bond and Francis Cortellino, senior CMHC specialists for housing market analysis, in the report.
“Despite this, the types of structures built and the target market for the new units they contained varied from one area to another. Exploring the different realities of these CMAs helps us better understand why some markets are more affordable than others,” they added.
Toronto housing starts lag behind population growth
As populations rise, the need for new housing increases. Some regions are able to add more housing compared to their population size better than others, CMHC pointed out, which can help to limit price pressures on homes and rentals.
On a per capita basis, Montréal, Toronto and Ottawa generally have the lowest levels of residential construction according to the report’s findings. For Toronto specifically, there has been a downward trend in the ratio of building versus population in recent years. In 2021, there were 56 housing starts per 10,000 population, down from 57 in 2020 and 58 in 2019.
“This indicates that, despite a high number of housing starts, construction has not been sufficient to keep pace with population growth; a situation that has certainly not helped reduce affordability problems in this CMA,” said the CMHC report.
However, the affordability challenges seen in the three cities are not of the same scale — housing types and regulations are also part of the picture in addition to the quantity of housing starts.
Calgary and Edmonton, on the other hand, have reported a higher starts-to-population ratio in recent years, where more than 100 housing starts per 10,000 population has been recorded over a certain period.
“This high level of construction relative to the population base has contributed to limiting pressure on prices,” the report noted.
Vancouver has recently become the CMA with the highest ratio of housing starts — with 93 starts per 10,000 population — thanks to a slowdown in population growth and a high volume of construction.
2021 housing starts surge in Calgary and Montréal
Last year, home building activity took off in some of Canada’s major urban communities.
Rising property prices, falling inventories and strong housing demand that was supported by low interest rates improved the confidence of developers and homebuilders to move ahead with new projects, CMHC said in its report.
Housing starts surged the highest in Calgary, which grew 62.6 per cent between 2020 and 2021 as 15,017 new units across all housing types broke ground. Single-family detached and apartment starts helped to support this growth, which increased 58.1 per cent and 91.4 per cent over the same time period.
Ranking in second place among the other five CMAs, housing starts increased 18.6 per cent annually in Montréal during 2021 thanks to nearly 27,300 apartment starts.
The majority of 2021 housing starts among the six CMAs were found in Toronto, where 41,898 units broke ground. However, starts grew only 8.6 per cent from 2020, the second-lowest rate between the CMAs after Ottawa, which reported 10,221 housing unit starts. Toronto also accounted for the most apartment starts between the other CMAs with 30,237 new units in 2021, up 7.7 per cent from 2020.
Diversity of housing types needed, but costs should be considered
In addition to increasing supply, CMHC stated in its report that a variety of housing types in different locations are needed to “provide housing options for households of different sizes, ages, and compositions.”
However, as a result of multiple financial factors, high-density housing is the most practical option.
“Housing diversity, however, needs to take land and construction costs into account,” said the report. “With land costs so high, only higher-density structures will be financially feasible. It will not be financially feasible to build new single-detached homes in our cities.”
When it comes to housing diversity, Ottawa has the best mix of single-detached, apartment and row homes, which had almost equal shares over the last five years and in 2021.
In Canada’s three major cities — Toronto, Montréal and Vancouver — apartments now represent three out of every four new housing units. Higher costs for land and restrictive geography have resulted in more apartment growth. Condominiums account for a strong majority of new apartment construction over the past five years in most cities, with the exception of Montréal where there is a strong rental market. The share of rental apartment construction also grew in 2021 among the CMAs compared to the average of the most recent five-year period.
Single-detached starts are most common in Calgary, Edmonton and Ottawa given their high availability of developable land. Meanwhile, just one in 10 housing starts were single-detached homes in Vancouver and Montréal.