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December 11, 2023

The contribution of community housing to Canadian productivity

Deloitte, the Canadian Housing Renewal Association, and Housing Partnership Canada recently released a report outlining how the community housing sector contributes to the economy. Their study included housing where at least some of the dwellings have rent-setting mechanisms that are not entirely governed by the laws of supply and demand (Statistics Canada’s definition). These include co-operatives, non-profit housing, public housing, and other affordable housing (e.g. mixed income housing where some units are funded by government). Just 3.5% of rental housing stock in Canada falls into this category, much lower than countries like the UK (16.7%) and France (14%), but on par with the US (3.6%) and Japan (3.2%).

One of their findings is that increasing the share of community housing to 7% of units in the country would result in boost GDP to $110 B to $179 B, and the additional 371,600 units would contribute $67-136B to our GDP by 2030.

The report does a good job of framing the demand and supply factors identified in previous research.

  • Demand factors include higher disposable incomes, population growth, low mortgage rages, expectation of higher housing prices, changes in the liquidity of the housing market, and the Bank of Canada’s low policy interest rate which has fuelled demand and encouraged debt accumulation. Repeat purchasers and investors make up 30% of the market, while the share of first-time homeowners is decreasing
  • Supply factors include long timelines for approvals, construction delays, availability of land, land use regulations, cost of materials, a shortage of workers, and no significant increase in the community housing sector since the mid-1980s.

Two significant quotes from this section (p12):

“The increase in demand by investors has led the housing sector to experiencing what some describe as a market failure, where the traditional principles of supply and demand no longer hold true with some investors speculating on housing as a commodity, skewing the market.”

And, in response to CMHC’s call for 3.5 million more housing units by 2030 to restore affordability levels since in 2001:

“However, researchers and advocates have concluded that increasing supply may not be sufficient to restore affordability. To succeed, governments and the sector will need to build a housing supply that accounts for the entire housing continuum, appreciates ownership and rental typologies, fits urban, rural and suburban settings, and are available at a range of socioeconomic status.”

To address Canada’s waning productivity, we need to pay attention to the location and affordability of housing, because unaffordable housing prevents skilled labourers from relocating for job opportunities, and can increase lost time and incomes due to long-distance commuting from more affordable parts of regions. There are also negative effects from things like overcrowding and neighbourhoods where people do not have access to networks and social capital which they need to succeed in their career trajectories.

The community housing sector accounted for 4.7% of Canada’s multi-factor productivity from 1962-2021, but it was as high as 9% from 1962-1993, the era when most of this stock was built. Doubling our community housing stock by 2030 would positively impact our productivity and economy, but it would mean that nearly one-quarter of all new homes built until 2030 would need to be community housing units. And provinces/territories would gain different percentages of units based on their current populations (e.g. Ontario, Quebec, and BC would see the largest numbers of units). The appendix has additional details on home prices, core housing need, waitlists for community housing, and the value of the community housing stock per province/territory (which has been increasing in BC, Manitoba, Ontario, New Brunswick, Nova Scotia, PEI, Newfoundland and Labrador, and Yukon).

The report recommends:

  • an increased investment in community housing to boost our GDP
  • generating a stable pipeline of community housing projects to account for gaps in public policy
  • providing dedicated funding for off-reserve Indigenous communities which have unique challenges
  • improved collaboration between government, stakeholders, and advocates (e.g. shared targets for builds, labour strategies related to housing, leveraging underused land to build units)
  • promoting innovation (e.g. building housing more quickly, sustainably, and affordably)

It’s an interesting way to look at the sector, and one I haven’t seen before.

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