Labour shortage in construction among obstacles facing Ottawa's housing plan: report

A new report from Desjardins warns that Ottawa's efforts to boost housing supply will likely fall short of its "optimistic" targets due to regulatory challenges and shortages in labour, materials, and financing.

Released on Tuesday, the report by economists Marc Desormeaux, Kari Norman, and Randall Bartlett identified the ongoing labour shortage in the construction sector as the "primary constraint" hindering new housing projects.

Earlier this year, the federal government introduced its Canada Housing Plan, aiming to create 3.87 million new homes by 2031 through initiatives like tax incentives and developing housing on public lands.

However, the report noted that 1.87 million of those homes were already projected to be built by 2031. The housing plan could add nearly 70,000 extra housing starts by 2028, on top of the 235,000 homes expected to be built without the new measures.

Despite the increase, these figures fall "well short of the pace needed" to meet the targets set by the Canada Mortgage and Housing Corporation (CMHC), which estimates that 3.5 million additional homes are required by 2030 to restore affordability. This would bring the total number of new homes needed to 5.8 million by 2030.

"Building 5.8 million new homes in the next eight years is an ambitious plan even if everything were perfectly aligned," the authors wrote, pointing out that it took Canada three decades to build its last 5.8 million homes. They added, "With significant labour, material, financing, and regulatory constraints, the stars aren’t currently aligned in Canada."

The Canadian Home Builders’ Association estimates that Canada needs over one million more residential construction workers to meet the CMHC’s target. The report highlights that slower population growth and an immigration system not focused on attracting skilled tradespeople means that more domestic resources will need to be directed toward residential construction to meet federal housing goals.

Rising interest rates and inflation have also increased the cost of financing construction projects. Additionally, regulations requiring the use of more expensive, climate-resistant materials due to extreme weather have further added to costs.

Still, the report emphasizes that Canada should not give up on addressing the housing crisis. "Even if it can’t meet 'affordability' as defined by the CMHC by decade’s end, the housing supply crisis can still be alleviated by building as many homes as possible," the authors concluded.