Budget 2023 & Canada’s housing shortage crisis
With last year’s federal budget focusing on housing, we should not be surprised that the issue was largely absent in Budget 2023. Most of the references to housing in the budget were re-announcements of past measures and progress updates on yet-to-be-implemented measures, such as the Home Buyers’ Bill of Rights. As such, we can only assess this budget on the overall vision it sets for the future of housing in Canada. Unfortunately, the federal government has shown, at best, an incomplete understanding of our current housing crisis. In particular, Budget 2023 fails to understand or acknowledge the hardships faced by international students and the rising rents in the communities in which they live.
Budget 2023 correctly recognizes that a housing shortage causes Canada’s housing affordability crisis.
As with last year’s federal budget, this year’s budget recognizes that supply shortages are at the heart of Canada’s housing affordability crisis and that these shortages drag both economic growth and investment. Budget 2023 reiterates the need to build more housing, specifically to “double the number of new homes that will be built in Canada within a decade.” Furthermore, it recognizes that housing policy is labour market policy, noting that the current housing shortages in some cities make it “difficult for businesses to attract the workers they need to grow and succeed.”
Last year’s budget set a target of building 3.5 million homes, across Canada, between the start of 2022 and the end of 2031. As with Ontario, the federal government is falling short of that target. Last year, 261,849 homes were started in Canada, and 219,942 were completed, well below the necessary 350,000 homes per year pace. These shortages do not look to improve in the short term, as TD Economics forecasts that Canadian housing starts will be 223,000 in 2023 and 206,000 in 2024, putting the country hundreds of thousands of homes behind in the first three years of the ten-year target.
Budget 2023 ignores the plight of international students, as it is overly focuses on “rebalanc[ing] the housing market in favour of Canadians looking for a home to live in.”
Canada’s population is surging, and much of that comes from a rapid rise in the number of international students and other residents on time-limited permits. In 2022, the number of non-permanent residents rose by over 600,000 persons, accounting for 60 percent of Canada’s population growth last year. This increase in enrollment contributes to high - and rising - rental costs in communities with colleges and universities. Rentals.ca reports that new rents on 1-bedroom apartments are up 23% in Calgary, Alberta, 19% in Quebec City, Quebec, and 24% in London, Ontario. These rent hikes create affordability challenges for international students and the rest of the rental market. International students get hit particularly hard as they are ineligible to collect the $500 top-up to the Canadian Housing Benefit which is designed to help households facing surging rents.
Despite these challenges facing international students and other renters, the federal government has indicated its goal is to “rebalance the housing market in favour of Canadians looking for a home to live in.” Ensuring a home for every Canadian should be a federal government goal. However, the government should also recognize that some of the most acute housing affordability challenges in Canada are faced by non-Canadians, particularly international students. The government must also acknowledge that housing this population, which is almost entirely made up of renters, requires an increase in the rental stock, which investors will own. We hope that next year’s budget contains measures to ensure everyone in Canada, regardless of their citizenship, has a safe and attainable place to call home.
Next year’s budget could address these omissions.
If the federal government hopes to achieve a 3.5 million unit housing target, it needs to enact substantive reforms to create the conditions for more private-sector housing investment. These reforms could include measures to make financialization work to enhance affordability rather than detract from it. Refocusing financialization would require changes to the tax code to make it more desirable for investors to build new attainable, family-friendly, and climate-friendly housing rather than buying existing units. One such mechanism would be the introduction of accelerated capital cost provisions for purpose-built rental projects. The federal government could also develop a strategy to lower the price of building materials, including reductions in import tariffs. Or how about an innovation agenda for housing to enhance productivity in homebuilding and accelerate the adoption of new methods and materials, such as mass timber? In short, the government needs more than a simple unit target, it needs a plan, and it needs it immediately.