The housing market operates under the fundamental principles of supply and demand: When demand outpaces supply, prices rise; conversely, when supply exceeds demand, prices fall. This dynamic holds true regardless of the type of housing constructed or the nature of its ownership, whether private, non-profit or municipal.

Canada Mortgage and Housing Corp. (CMHC) has highlighted the pressing need to address housing affordability. To restore affordability to levels seen in 2004, CMHC estimates that Canada will require an additional 3.5 million housing units by 2030. A significant portion of this shortfall is concentrated in Ontario and British Columbia, two provinces that have experienced substantial declines in affordability over the past two decades.

Supply gap

In Ontario, the situation is particularly acute. The province faces a considerable housing supply gap, necessitating a coordinated effort to increase construction to meet demand and restore affordability.

Each new housing unit constructed brings us closer to this goal, irrespective of its price point or type. When a household moves into a new home, they vacate their previous residence, which in turn becomes available for another family. This process, known as a “migration chain” or “filtering,” creates a ripple effect throughout the housing market.

Economist Evan Mast conducted a study analyzing this phenomenon. By examining resident movement patterns into new buildings and tracing subsequent relocations, Mast found that for every 100 new housing units built, approximately 70 units become available in below-median income neighborhoods within five years. Of these, a significant portion becomes affordable for the lowest-income households.

While the positive effects of the moving chain are evident, they are not immediate. It typically takes approximately three years for the majority of these benefits to materialize. However, this approach presents a sustainable path to affordability, as long as municipalities do not hinder the process by restricting new construction.

Wide-reaching benefits

Building new housing units, even those at higher price points, has wide-reaching benefits for society. Instead of imposing complex regulations on homebuilders or investing solely in government-funded housing projects, municipalities should prioritize alternative solutions. Simplifying and accelerating the permitting process, reducing zoning complexities and eliminating unnecessary taxes on new construction can help lower housing costs.

By alleviating these bureaucratic obstacles, cities can create a pathway to the affordable housing of tomorrow. This is critical for younger generations, who are witnessing the dream of homeownership become increasingly unattainable.