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The number of housing starts stood at 240,000 in 2023 in Canada, down 8.2 % compared to the previous year, a pace too slow to meet growing demand.

  • Gérald Fillion (View profile)Gérald Fillion

Inflation data released Tuesday clearly shows that the country's housing crisis is costing Canadians dearly. Over 12 months, rents are up 7.7%, an unsustainable growth for many households. On the one hand, we are not building enough housing. On the other hand, Canada is experiencing unprecedented growth in its population.

Has Canada fallen into a demographic trap? This is the expression used by economists Stéfane Marion and Alexandra Ducharme, from the National Bank, in an economic note released Monday. To meet current demand and reduce housing cost inflation, Canada would need to double its construction capacity to about 700,000 starts per year, an unattainable goal, economists write.

However, the number of housing starts, which has been declining for several years, stood at 240,000 in 2023 in Canada, in urban and rural centers. This number, too low to meet growing demand, represents a drop of 8.2% compared to the previous year.

The data in the following table shows the gap between population growth and housing starts in the country over the last three years. Population growth statistics represent the 12-month increase from October 1 of the previous year to September 30 of the year in question. Those on construction starts, also over 12 months, cover the period from January 1 to December 31.

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It must be understood that natural population growth (i.e. the ratio between births and deaths) is almost zero in Canada. Almost all population growth now comes from permanent and temporary immigration. This is essential to the growth of the economy, according to Prime Minister Justin Trudeau, who was in front of members of the Chamber of Commerce of Metropolitan Montreal on Tuesday.

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Or we massively reduce our immigration targets, said -he said, which will hurt the labor shortage and economic growth. Or we need to find a way to build a lot more housing more quickly. However, this is something that we are doing in order to continue to have a growing and prosperous country.

While denying being anti-immigrant, Conservative Leader Pierre Poilievre is of the opinion, for his part, that we must also act on the number of immigrants. He proposes to better link the growth of immigration to the growth of housing starts.

According to economists at the National Bank, our policy makers must not just target the supply of housing, but recognize that beyond a certain number, demographic growth is an obstacle to our economic well-being. The fact that real GDP per capita has been at a standstill for six years is a good example.

They add: Canada finds itself in a demographic trap for the first time in modern history. What is even more worrying is that the decline is not simply due to a lack of housing infrastructure. In fact, the stock of nonresidential private capital per capita has been declining for seven years and is currently no higher than in 2012, when it reached a record level in the United States. p>

Much was made a few days ago of the fact that officials had informed the Trudeau government two years ago that population growth was putting too much pressure on housing affordability. However, the data used by National Bank economists is public and is known to political leaders.

By sharply increasing its immigration targets and the reception of temporary workers and foreign students, we can wonder whether the Trudeau government has taken into account all the components of the equation. If the great opening to immigration helps to alleviate the labor shortage, it contributes to creating, in return, strong pressure on services and rents, which fuels inflation in the sector of the housing.

Canada is a welcoming, generous and open country, a country of immigration, to which a majority of Canadians adhere. More and more citizens are of the opinion, however, that the reception thresholds are becoming too high, given the sharp increase in permanent immigration targets and the number of temporary immigrants arriving in Canada.

One ​​might wonder if the time has not come to review the strategy in this area in Canada. Housing starts fell 8% in 2023, with a marked drop of 37% in the greater Montreal area. In the circumstances, economists Marion and Ducharme are of the opinion that we must cap the number of immigrants in the coming years to accommodate between 300,000 and 500,000.

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