All Homes Are Not Created Equal: Canada Must Build the Right Type

?New Canada appears to be building more homes, but are they of the right type?

Over the past 50 years, Canada's housing construction landscape has transformed significantly. Although there has been an uptick in recent years, our housing construction per capita rate still pales compared to the early 1970s, when 60,000 to 80,000 new dwellings were being started per quarter. Back then, the population was much smaller than today. The recent increase in construction remains insufficient when viewed against current demographic realities.

Another troubling sign is that the surge in housing starts witnessed in 2021 and 2022 is now faltering. The pandemic-fueled momentum is waning, which should concern policymakers and real estate developers.

Equally important is the type of housing that we are building. Quarterly housing starts data from Haver Analytics show a significant shift in the composition of new homes compared to the 1970s and 1980s. Specifically, since 2001, we've seen a marked decline in the construction of single-detached homes. Conversely, the construction of multi-family dwellings (predominantly apartments and condominiums) has grown steadily since the 2008 recession.

In the early 1970s, single-family detached homes and multi-family units were being constructed at relatively equal levels. In the 1980s and 1990s, single-family homes outpaced all other types of housing, ensuring ample supply to stabilize prices. Although prices did rise, the steady increase in new single-family homes helped moderate price inflation.

Since the global financial crisis, however, the construction of single-detached homes has not recovered to previous levels. This is problematic, as demand remains robust for this type of housing, yet the constrained supply pushes prices upward. Meanwhile, the rapid growth of multi-family housing construction since 2009 has helped to keep apartment and condo prices in check.

To summarize, when fewer single-detached homes are built, while demand remains steady or even increases, prices for these homes will rise at a higher rate than those for multi-family dwellings. We need to test this hypothesis in a subsequent post empirically.

Moving forward, Canada's ambitious plan to increase housing supply must also prioritize the right types of homes. Peak millennials, entering their child-rearing years, will seek ground-oriented family homes to house their families.

Additionally, we must ensure the construction of affordable homes with ownership structures that prevent speculative flipping for quick profits. Adjusting ownership models and regulations can help keep these units truly affordable over time. Mike Labbé , the C.E.O. of Home Opportunities Non-Profit, has pioneered ownership frameworks in the past to ensure the long-term affordability of affordable owned dwellings.

Reflecting first on the type of homes we build is crucial. We need a more holistic strategy that meets Canada's growing demand for family housing while ensuring that affordable options remain within reach of all Canadians.