Increasing housing supply in the rental and homeownership market is vital for affordability

By Peter Squire

Earlier this year, Scotiabank’s chief economist Jean-Francois Perrault released a report that identified Manitoba as one of three provinces to be chronically undersupplied in terms of having adequate housing to meet the needs of its population on a per capita basis. As Perrault stated, “Alberta, Manitoba and Ontario recorded the lowest number of homes per capita relative to other provinces.” Ontario alone needs 650,000 units to equal the Canadian average. He also noted that Canada’s population-adjusted housing stock is the lowest of the G7.

Since this time, much more discussion has ensued on the need to accelerate housing supply (e.g.  strong messaging and direction in this regard in April federal budget and more recent Ontario provincial election) across the country to not only meet our growing population needs but slow down and attempt to keep a lid on increasing house prices as we need to do what we can to make housing more affordable in Canada.

In June, Canada Mortgage and Housing Corporation (CMHC) released its own housing report called
Canada’s Housing Supply Shortages: Estimating what is needed to solve Canada’s affordability crisis by 2030. The numbers are quite staggering, with 3.5 million additional housing units needed beyond current projections. To no surprise, Ontario as the most populous province in the country with over 15 million people needing 1.85 million units, and BC and Quebec combined needing another 1.19 million units. These three provinces, therefore, represent 86% of the additional units CMHC has identified to make housing affordability a reality in Canada by 2030.

Here is where it gets interesting. CMHC identifies Manitoba, with its much smaller population, still requiring 260,000 additional units by 2030. This is based on Manitobans with an average income being able to afford paying 30% of their disposable income towards the average house. In comparison, Saskatchewan needs an additional 100,000 units with other provinces needing much less.

Many of us, including CMHC, need to delve more into how this staggering number was derived as even if we double the number of units we built in 2021 at 8,000 — and we are on that trendline this year — this may only get us another 120,000 units by 2030, so very improbable that this report’s number for Manitoba is achievable no matter what roadblocks are cleared to pave the way for more construction of additional units. 

One of the authors of this report, CMHC’s deputy chief economist Aled ab Iorwerth, whose intent is to see better matching of households with the housing they want, sums it up by stating, “Canada’s approach to housing supply needs to be rethought and done differently. There must be a drastic transformation of the housing sector, including government policies and processes, and an ‘all-hands-on-deck’ approach to increasing the supply of housing to meet demand.”

Whatever number may be necessary to ensure Manitoba can keep its housing affordable, there are some critical areas that need to be tackled in order to address our housing supply shortage in Winnipeg. These include: enabling shovel-ready infrastructure capacity on identified land that can be made available to develop; intensifying density in existing areas of the city such as along rapid transit corridors; more availability and hiring of building trades to step up production; faster development turnaround times including expediting permit approvals; and greater improvement in current supply chain issues with prices more in line with what builders can secure to keep housing affordable for buyers to purchase.

Manitoba Home Builder’s Association President Lanny McInnes just weighed in on the supply chain issue for homebuilders. In a Winnipeg Free Press column, he wrote, “Challenges sourcing materials and labour have caused construction delays and have made predicting construction timelines extremely difficult. The result of these challenges has been unprecedented price increases on many construction materials which is adding tens of thousands of dollars onto the cost of building a new home.” He also added, “The combination of slowed production and increased demand has substantially impacted the price to build homes in an unprecedented way. According to CHBA’s Housing Market Index, when combining lumber and other material price increases, the national average construction cost increase for a 2,482 square-foot home was up $68,060 per home at the end of 2021.”

One advantage in which Winnipeg has been singled out this year, compared to most major housing markets in the country, is on its affordability. In RBC Economics June 2022 housing trends and affordability report, Canada surged 3.7 percentage points to 54.0 per cent in the first quarter of 2022 — the worst level of affordability since the early 1990s. The report cites that the situation in Toronto, Vancouver and Victoria is reaching extreme levels. On the other hand, despite Winnipeg seeing some price affordability erosion in the last year, its Q1 2022 rating for single-family detached of 30.4 per cent is only 0.5 per cent higher than its long-term average of 29.9 per cent.

RBC’s housing affordability measure shows the proportion of median household income that would be required to cover mortgage payments (principal and interest), property taxes, and utilities based on the benchmark price for single-family detached homes.

We know now, heading into the second half of 2022, that all affordability measures will be higher due to the rapid rise in interest rates. Though a full one percentage point increase in mortgage payments equates to a more than $600 per month increase in Vancouver compared to $125 to $160 in more modestly priced markets.

And in Winnipeg’s case, which local housing expert Tom Carter has identified in the 2020 City of Winnipeg Comprehensive Housing Needs Assessment report, 8% of the city’s housing is in need of major repair as Winnipeg has some of the oldest housing stock in the country. CMHC’s housing supply call-to-action identifies that not all the additional housing units required have to be new construction. Existing housing structures can be refurbished as HOP has done over the years, or other structures can be repurposed, as proposed for the Bay downtown and for other former office and industrial buildings.

As an organization which was instrumental in setting up Housing Opportunity Partnership (HOP) in the late 90s, while also co-chairing an important provincial housing rental roundtable in 2012, the Winnipeg Regional Real Estate Board could not agree more with CMHC that increasing housing supply in the rental and homeownership market is critical to achieving affordability.

In fact, the Winnipeg Regional Real Estate Board, as it has done over many previous civic elections — such as when it held an all-mayoral candidate forum at the Burton Cummings Theatre back in 1992 — is actively engaged in the current election  scheduled for October 26.

A front-and-centre issue the Board is asking mayoral candidates to respond to in our upcoming mayoral podcast series — beginning in early August — is how do they intend to address Winnipeg’s housing supply shortage in order to ensure our housing remains some of the most affordable in the country for years to come.

Peter Squire is the Winnipeg Regional Real Estate Board’s Vice-President External Relations & Market Intelligence.