In the next ten years, the Parliamentary Budget Officer predicts that Canada will need to construct 3.2 million new homes to address the housing shortfall, a target that is not currently being met. The latest report by the PBO suggests that the number of new housing constructions will rise in the coming years before gradually returning to typical levels. The projection indicates an average annual completion of 227,000 new homes over the next decade, with an additional 65,000 homes needed each year to bridge the housing gap.
Parliamentary Budget Officer Yves Giroux emphasized the importance of considering unmet housing demands from previous years, known as suppressed demand. He mentioned that the decline in new household formations is expected due to Canada’s reduced immigration targets. While acknowledging that cutting immigration numbers can alleviate housing demand pressures, Giroux highlighted that the impact may not fully resolve the existing challenges, given the influx of immigrants in recent years.
Giroux also pointed out the presence of suppressed demand in the market, with vacancy rates dropping to 3.3% in 2024, significantly below the average of 6.4% recorded from 2000 to 2019. Low vacancy rates limit housing choices, potentially leading to higher rents or housing prices beyond what individuals can comfortably afford. The combination of increased construction activity and reduced demand is anticipated to help normalize vacancy rates and address the escalating home prices seen in recent times.
The PBO estimates that approximately 2.5 million homes will be constructed over the next decade, falling short of the 3.2 million homes required to close the housing gap. Notably, the report does not incorporate recent federal housing policy commitments, including the Liberal Party’s pledge to double housing construction during the election campaign. Giroux emphasized that the effectiveness of bridging the housing gap will depend on the successful implementation of housing initiatives by Ottawa and other governmental levels, highlighting the need for monitoring and assessment as these plans unfold.
