Unlocking Efficiency: CMHC Report Reveals Potential for 400,000 New Home Starts in Canada

Key Takeaway

• CMHC report reveals Canada's home building sector could start 400,000 units annually with current workforce, far above the 240,000 actual starts.
• Municipal red tape identified as a major barrier to achieving Trudeau’s goal of 3.9 million new homes by 2031.
• Study challenges the notion that more workers are needed for increased housing production, suggesting efficiency improvements instead.

Housing Production Efficiency

Canada's housing agency has identified that the country possesses the necessary workforce to significantly increase its home construction output. According to a report by Canada Mortgage & Housing Corp. (CMHC), the 650,000 workers in the home building sector last year had the capacity to initiate work on 400,000 new units. This figure starkly contrasts with the approximately 240,000 units that were actually started, highlighting a substantial gap in potential versus actual housing production.

Regulatory Barriers

The report, authored by Mathieu Laberge, senior vice president at CMHC, points to municipal red tape as a primary obstacle hindering the construction of new homes. Despite the ambitious goal set by Prime Minister Justin Trudeau’s government to build 3.9 million homes by 2031—a target that necessitates doubling the current annual pace of housing starts—progress has been slow. The construction industry and economists have voiced concerns over perceived labor and material constraints, suggesting the sector is operating at full capacity. However, Laberge's analysis, which spans data from the late 1990s, indicates that the industry has previously achieved higher levels of productivity per worker and that disparities in efficiency exist across different cities.

Productivity and Potential

Laberge's findings challenge the prevailing narrative by the Canadian Homebuilders Association, which argues that a doubling of the workforce is essential to meet housing demands. Instead, the report suggests that with the current labor force, there is room for productivity improvements. By examining historical data, Laberge demonstrates that the construction industry has the potential to enhance its efficiency and output without necessarily increasing the number of workers. This perspective shifts the focus towards optimizing the use of existing resources and addressing the inefficiencies that have crept into the home building process over time.

Street Views

• Mathieu Laberge, Canada Mortgage & Housing Corp. (Neutral on Canadian housing construction):

  "The 650,000 workers building homes in Canada last year should have been enough to start work on 400,000 new units, compared to the approximately 240,000 that actually got underway... For years, the residential construction industry pointed to regulation as the most significant constraint to building more houses. Evidence shows that progress can indeed be made on that front, and all levels of government are adapting, but more must be done."