House prices have risen so high that millions of new units need to be built in Ontario and across the country by 2030 for affordable housing to once again be a reality.

"To put it another way, we need the rate of housing starts to more than double," said Aled ab Iorwerth, deputy chief economist at the Canada Mortgage and Housing Corporation (CMHC), in a call with reporters.

The CMHC released a report on Thursday morning looking at the national housing-supply crunch that also specifically dug into Ontario, B.C., Quebec and Alberta markets. It's going to take a full-court press from all orders of government, and the private sector, to get anywhere, ab Iorwerth said.

"The size of this challenge should make it clear that the federal government cannot address housing affordability on its own. We need partnerships with other orders of governments and the private sector, as well, in order to increase supply," he said.

At the current pace of construction, Canada will go from about 17 million to about 19 million houses by 2030. An additional 3.5 million homes are needed on top of the current trend — for about 22 million total homes across the country — for prices to return to a semblance of normalcy.

In Ontario, the current construction pace gets the province from around six million to about 6.7 million by 2030. An additional 1.9 million homes, on top of the current pace, are needed to tame prices.

"The supply challenges are largely isolated to a few provinces. ... Of the additional 3.5 million homes (needed), over half are needed in Ontario," with other provinces like B.C., Manitoba and Quebec making up the bulk of the other needed stock, said Mike Moffatt, senior policy director of the Smart Prosperity Institute and a professor at Western University.

Places like Alberta, New Brunswick and P.E.I. are "basically on track to meet their housing needs," he said.

The report reached higher numbers than others past, including the results from Ontario's Housing Affordability Task Force. One of the reasons was it used 2003-04 as a baseline for affordability, whereas other reports had used more recent years.

"We want to restore affordability to levels last seen in Canada in 2003-04 when the economy was stable and housing costs were a relatively low share of the economy," the report said.

"Around 2003-2004, an average household would have had to devote close to 40 per cent of their disposable income to buy an average house in Ontario, and close to 45 per cent in British Columbia. In 2021, such a household would have had to devote close to 60 per cent of their incomes to housing."

If unaddressed, the housing crisis will continue to rock Canada's economy, the report noted.

"Today, a large portion of renters’ and new homebuyers’ incomes must be spent on a place to live because housing costs have exploded over the last decade," it said. "By deterring workers from moving to our urban centres that contribute so much to Canada’s economic prosperity, high housing costs risk wider economic damage as well."

A mismatch between supply and demand, with supply lagging far behind, is the main driver behind the price increases, the report said.

Simply trying to speed up building, largely through regulatory reforms at the provincial level, will lead to other problems.

"If you waved a magic wand and made all those regulatory issues go away, you would run into a skilled-labour shortage pretty quickly," Moffatt said.

There's also rising construction-material costs to contend with, and the industry isn't known for being particularly innovative or efficient, the report said. New development must also be mindful of environmental concerns.

"The construction sector needs to become more productive as well because its productivity growth has been low in relation to the rest of the economy," the report said. "There may also be scope for significant innovation in the housing supply system among developers and builders. ... Alternative materials and design hold out the prospect of lowering construction costs. Financial institutions, who are increasingly involved in financing new developments, should be pushing for more innovation."

Moffatt is confident that won't be a big issue should the appropriate regulatory changes — such as zoning reform to allow for denser housing in urban areas — happen.

"You only become more productive and innovative if you're facing constraints. The industry has so much trouble getting shovels in the ground because of all those regulatory processes," he said. "But if we can figure out a way to streamline those, then the industry is just going to have to get more productive or else they're not going to find the people."

There's a role for the federal government there, he said, despite provinces being the key players in the affordability issues overall.

The Innovation, Science and Industry department could look at ways to improve modular housing, for example. The regulatory side, however, largely lies at the feet of provincial governments.

The feds can also use funding power as a stick, he said. That could mean using the $4-billion Housing Accelerator Fund to help train more municipal staff to speed up approvals, tying transit funding to zoning reform or using the immigration system to get more skilled tradespeople into the country.

Ontario's government-commissioned housing task force made 55 recommendations aimed at getting 1.5 million homes built in the next 10 years. The government accepted some of the recommendations in its More Homes for Everyone Act but left some of the more contentious ones — like limiting exclusionary zoning — off the table.

As a result, the Progressive Conservatives' recent budget projected housing starts won't come close to meeting the pace needed to get the 1.5 million homes built.

Housing starts were at just over 100,000 in 2021, the highest since 1987. The budget predicts those numbers will hover around 85,000 for the foreseeable future, meaning about 346,000 will be built between now and 2025.

Premier Doug Ford repeatedly said during the campaign his government would meet the 1.5 million target but, when presented with the figures in his budget, would not specifically address them.

Canada and Ontario need millions of new homes to reach affordability

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