Last month, the Government of Canada released its 2023 Fall Economic Statement, an annual fiscal report that provides an update on the state of the Canadian economy and the government’s plans for future spending. This year’s statement had a strong focus on ways to tackle Canada’s housing affordability and supply crisis.

The statement revealed plans to allocate billions of dollars to increasing housing affordability and accessibility across the country, including the creation of more public housing, incentives for developers to build much-needed rental inventory, measures to reduce short-term rentals as well as recommendations for financial institutions to provide Canadian borrowers with mortgage relief options upon renewal.

Urgent need to address housing shortage for first-time buyers and middle-income earners

While it is imperative to ensure low-income residents have access to public and affordable housing options, millennials — the largest portion of our population — are also greatly impacted by the current housing crisis. It has become increasingly difficult for young Canadians with decent-paying jobs to afford a home without financial assistance from parents or family. While the proposed measures in this statement are a positive step forward, there remains an urgent need to address the lack of housing supply for first-time buyers and middle-income earners. 

With the rising cost of living coupled with continued interest rate increases in 2023, many Canadians are feeling the pressure of financial stress when it comes to their ability to purchase a home and/or manage mortgage payments. While it is encouraging to see that the government is working to address the ongoing challenges buyers, sellers and homeowners are facing in the current economic climate, further measures are required to increase housing supply in the short- and medium-term.

Steps in the right direction, despite need to curb inflation

Incentivizing developers to build more homes at a faster rate — specifically purpose-built rental stock — is a promising step in the right direction. In addition to its plans to encourage developers to build thousands more rental units, the federal government announced new limitations on tax deductions for landlords of short-term rental properties, as well as funding to help municipalities crack down on offenders in regions where the practice is prohibited. While these measures are intended to open up more inventory for longer-term rental contracts and increase the number of properties for sale, they are unlikely to have a material impact on supply, especially in major cities where inventory is most needed. 

The Liberal government drew criticism from opposition parties and the central bank for announcing additional spending at a time when the country should be focused on reducing inflation. While bringing inflation under control is important, it’s also critical to prioritize access to affordable housing for all Canadians. With aggressive immigration targets and increasing household formation, it is essential to focus efforts on the creation of more homes. Supply remains decidedly out of step with demand, even if many would-be buyers remain temporarily sidelined. Home prices are poised to appreciate further when interest rates inevitably begin to come down.

Overall, we are pleased to see a strong commitment from the government to address the supply side of the ongoing housing affordability crisis. Although there are concerns about additional spending causing further inflationary pressures, the emphasis on creating affordable rental housing and incentivizing developers is crucial. It is my hope that the Canadian government continues to tackle the severe supply shortage, and prioritizes addressing the lack of affordable homes for middle-income Canadians.