Residential Market Commentary - Closing the housing gap

Canada is not on track to close the country’s housing gap by 2035.  The latest report from the Parliamentary Budget Officer (PBO) says 3.2 million new homes will need to be built in the next 10 years to return the national vacancy rate to its long term average.

The PBO is an independent economic, financial and policy adviser to the federal government.

According to the report, reaching the 3.2 million goal will require an average of 290,000 new homes a year, over the next decade.  Right now, PBO estimates put new home construction at an average of 227,000 units a year.  That totals about 2.3 million homes by 2035, a shortfall of about 800,000 units.

For comparison purposes, Canada’s best year for new home construction was 2024 when 276,000 units were completed.  Construction would have to outpace that performance for 11 straight years in order to hit the 3.2 million mark.

There are some caveats in the PBO report.  The estimates for Canada’s housing requirements are well below those of the Canada Mortgage and Housing Corporation, which projects the country will need 5.3 million new homes by 2035.  The report projects that reductions to federal immigration targets will reduce the rate of household formation.  In turn, that will reduce demand for new housing.  And the report does not take into account government promises to double the pace of new home construction to 500,000 units a year.