Canadian Prime Minister Mark Carney will prioritize housing as one of his top economic concerns for his incoming government.
In the April 28 federal election, Carney and the Liberals defeated Pierre Poilievre and the Conservatives, securing a minority government. Now that the campaign is over, the prime minister and the Liberal Party will focus on implementing policies to address the nation’s most pressing challenges.
In his first press conference since winning the election, Carney vowed to transform Canada’s economy as the country faces both domestic and international battles. Housing will be a key focus of his government’s priorities, with a pledge to establish a new Canadian housing industry.
To achieve the ambitious goal of doubling homebuilding to approximately 500,000 new homes annually, Carney has proposed several key ideas:
- Extend $25 billion in financing for prefabricated home builders.
- Eliminate the Goods and Services Tax (GST) on new homes priced between $1 million and $1.5 million. Additionally, the GST will be removed for first-time buyers of newly-built homes below $1 million.
- Lower municipal development charges for multi-unit residential housing.
- Cap immigration levels to alleviate housing demand pressures.
Furthermore, the former head of the Bank of Canada and the Bank of England will establish Build Canada Homes, a government agency responsible for overseeing affordable housing development.
This marks the beginning of a potential transformation of Canada’s housing market.
Carney expressed his intention to unveil more details of their plan in the coming weeks, emphasizing their commitment to engaging with Canadians as they embark on the largest economic transformation since World War II.
Housing affordability has indeed deteriorated across the country in recent years. According to housing data from the Canadian Real Estate Association (CREA), the national average home price has risen by nearly 40 percent, reaching approximately $679,000, compared to pre-crisis levels.
Will Carney’s plans succeed in building supply and restoring price stability for prospective middle-income homebuyers in major urban centres and rural communities? Will the country reverse its trend of becoming a nation of renters? Will home prices be within reach for millions of Canadians? Will policymakers only focus on Toronto and Vancouver?
Industry experts have mixed views about the Prime Minister’s proposals.
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Carney’s GST idea, which his Conservative challenger also proposed, is widely expected to pass almost as soon as the House of Commons is reconvened.
However, whether it restores housing affordability remains to be seen.
Penelope Graham, a mortgage expert at Ratehub, told Global News that it is a positive move but would be a “drop in the bucket” for bolstering housing affordability.
She explained that this move may not significantly impact affordability in more expensive markets. For instance, the benchmark price for a new condo in Toronto is already a million dollars, compared to a resale unit that is around $680,000.
Experts highlight the bright spot in Carney’s housing plan as its emphasis on prefabricated housing. These units are constructed off-site in a factory and transported to a final location for assembly.
Studies show that prefab homes can reduce costs by up to 20% and lower construction times by 50%.
An August 2024 University of Toronto study stated that modular construction does not inherently mean affordable construction costs, but costs can become more predictable if intentionally controlled in the design and planning process.
Despite research indicating their efficacy, factory-built homes account for less than 5% of Canada’s housing market, according to The Globe and Mail.
The Liberal plan aims to expand the housing supply by nearly half a million new homes annually over the next decade. According to the Prime Minister, this will be achieved through the establishment of a new federal housing entity and an extension of the Housing Accelerator Fund.
While ambitious, experts caution that such a rapid expansion is challenging to replicate, especially considering the unprecedented growth that followed World War II.
Steve Pomeroy, an industry professor at McMaster University’s Canadian Housing Evidence Collaborative, shared insights in an interview with Global News.
Pomeroy recalled that during the 1970s, 1980s, and 1990s, the Canadian Mortgage and Housing Corporation (CMHC) played a significant role in delivering various housing programs. They established a network of 96 branch offices across the country, staffed with professionals in various fields such as architecture, engineering, building inspection, loans, and underwriting.
Pomeroy expressed skepticism about the feasibility of emulating such extensive support for local development within a single federal agency.
Caution is advised as the Canadian real estate market has experienced significant changes in recent years, including soaring mortgage rates and a surge in demand. While Canadian officials at all levels of government have proposed solutions to address the country’s housing challenges, affordability remains an elusive goal. The success of Prime Minister Carney’s plans in ensuring greater access to homeownership remains uncertain.
