There are no solutions to Canada’s housing crisis—only trade-offs

Printer-friendly version
Appeared in the Globe and Mail, December 13, 2023
There are no solutions to Canada’s housing crisis—only trade-offs

We’re running out of superlatives to describe Canada’s housing crisis. And for good reason—Canadians face the highest housing costs (as a share of household income) in the G7 group of developed countries. Canadians are also rightfully exasperated with the lack of progress.

The good news is there are policy options for this problem. The bad news is we haven’t decided which options we’re willing to accept. American economist Thomas Sowell once said “there are no solutions, only trade-offs.” That is, solving a problem entails a choice. And choice entails forgoing the alternatives.

For example, damming a river to protect a town from seasonal flooding means accepting that a reservoir will form on other side of the dam. The reservoir—and all it may entail for its natural surroundings—is preferable to the alternative—yearly floods, and all they may entail for the townspeople.

At its heart, Canada’s housing crisis stems from a growing gap between housing demand and supply—many homes are needed, but too few are built. An estimated 5.8 million new homes nationwide are required to restore some semblance of affordability by 2030, but Canada’s currently on track to build less than half that. Closing this gap will require significant increases in investment, labour, materials or productivity improvements, but more importantly it will require political will.

But we’re not there, because a clear majority of Canadians has yet to agree on how to tackle the problem. Specifically, we have three broad choices, each with their own trade-offs.

First, we can build our cities outward. And accelerate the creation of new neighbourhoods at the edge of our communities, as has been Canada’s way for most of its history, but especially after the Second World War and mass adoption of personal automobiles. Canada has also traditionally used its enormous landmass to build entirely new cities including railroad and resource boomtowns from Calgary to Dawson City.

The trade-off? More land for homes means less land for everything else. Canadians who currently oppose the redesignation of farmland or other rural areas surrounding cities would need to accept more homebuilding in these areas. And in more remote regions targeted for development, the thorny issue of divvying up Crown land (the majority of Canada’s land area) would inevitably emerge.

Second, we can grow upward and become denser by shoehorning additional homes into existing neighbourhoods. To an extent, we’re already doing this—more than half of homebuilding between 2016 and 2021 occurred within existing urban areas, and recent government reforms (e.g. allowing the conversion of single-family homes to triplexes) signal an appetite for more. But given the estimated housing shortage, Canada’s cities would need to at least triple or quadruple the current rate of densification to close the housing gap.

The trade-off here is that most neighbourhoods would change—perhaps drastically. Canadians in urban areas, for instance, would need to mentally divorce themselves from the notion of owning single-family detached homes with garages and yards, and accept that neighbourhoods can’t stay frozen in time. As famed urbanist and former Torontonian Jane Jacobs put it, “a city cannot be a work of art.”

Third, we can grow our population more slowly. Faced with an enormous gap between the number of homes Canada needs and the number built, we could simply shrink the need. Governments (thankfully) don’t control how many children Canadians have, but they do determine immigration policy and the number of permanent and non-permanent residents in Canada. Anyone broadly opposed to historic increases in homebuilding (either at the urban fringe or within existing neighbourhoods) but still wishing to improve affordability, wants to reduce population growth—whether they know it or not.

The trade-offs here are more complex. If the federal government reduces immigration levels, Canadians must accept new demographic realities and policy solutions (that is, more trade-offs) such as vast improvements to productivity to complement a slower-growing or perhaps shrinking workforce, and changing how and when Canadians retire, among other considerations.

Of course, there are many variations to these three broad choices. Canadians would likely pick variations of one, two or all three combined. We could also pick neither, and in many ways we have. We don’t build enough homes either within or outside of existing urban areas, and our population is growing faster (in absolute terms) than at any other time on record.

Tellingly, most respondents in a recent poll supported increasing housing density in Canadian cities, yet just 20 per cent agreed it was a “good thing” for their neighbourhood (43 per cent saw density as a “bad thing”). Clearly, many Canadians do not yet understand the trade-offs required to improve affordability.

Politicians are only as effective as the demands we make of them, and right now, those demands remain unclear. Until we’ve collectively rallied behind some variation or combination of the broad options listed here—including its trade-offs—to close the gap between the number of homes we need and the number available, our implicit preference is the status quo. It’s as simple as that.

Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.