Canadian Real Estate Shortage Overstated, Condos Won’t Fix Costs

A recent report from BMO Capital Markets challenges the prevailing belief that Canada is facing a severe housing shortage. Contrary to the widespread narrative, the bank suggests that the issue has been overstated and that the country's housing supply has generally kept pace with population growth until recent years .

The report indicates that the perceived shortage became more pronounced post-pandemic, particularly after 2022, when Canada experienced a significant surge in immigration. This population increase led to a higher number of people per household, creating the impression of a housing crisis. However, BMO's analysis reveals that to return to 2016 levels of housing availability, Canada would need to build approximately 600,000 units—a figure substantially lower than the millions often cited by policymakers .

Furthermore, the report critiques the strategy of relying heavily on condominium construction to address affordability issues. BMO argues that while condos add to the housing stock, they do not necessarily align with the types of homes in demand, such as single-family residences with access to transit. The focus on condos may not effectively alleviate affordability challenges .

The bank also highlights that government stimulus aimed at boosting housing construction has had unintended consequences. These initiatives have often led to increased demand for materials and labor, driving up construction costs and, paradoxically, making housing less affordable. Additionally, such stimulus has sometimes supported inefficient projects, further exacerbating the issue .

BMO's findings suggest that the core problem lies not in a sheer lack of housing but in the mismatch between the types of housing available and the needs of the population. Addressing affordability may require a more nuanced approach that considers the specific demands of different communities rather than a blanket increase in housing units.

As the debate over housing policy continues, BMO's report calls for a reassessment of current strategies. It emphasizes the importance of aligning housing development with actual demand and cautions against overreliance on solutions that may not effectively address the underlying issues of affordability and suitability.