Supply-Side Solutions

A CMHC report says housing affordability is a supply issue.

When demand outstrips supply in the housing market, what’s the best solution? Recent regulatory focus has been on addressing demand, but a new report says that approach may be backward.

In his Calgary Sun story “Supply Shortages Must Be Addressed,” homes/real estate editor Myke Thomas spotlights Examining Escalating House Prices in Large Canadian Metropolitan Centres, a new report from the Canada Mortgage and Housing Corporation (CMHC). The report tells us that when it comes to housing affordability, supply – not demand – is the problem. 

The Calgary Home Builders’ Association (CHBA) agrees with this conclusion.

“The national discussion about housing markets so far has focused most on demand factors: Population trends; low interest rates; economic growth; and even foreign buyers. This report asks important questions and starts to give some answers about the key role of supply, meaning lack of appropriate supply, in price escalation.”

- Kevin Lee, CEO of the Calgary Home Builders’ Association

The report says one significant factor is restrictive land policies, which affect supply and contribute to housing price increases. Here are some key points from the report:

  • Limited data exists to inform policy decisions about Canadian housing dynamics.
  • Cities with highly regulated housing usually have the largest housing price escalations.
  • Housing affordability can be addressed by across-the-board increases in housing supply.
  • Increasing housing supply in under-utilized, previously developed “brownfield” areas (rather than new “greenfield” areas), will help stabilize pricing…but land restrictions on greenfield development increase the cost of housing.

While the report favours building high-density housing, the (CHBA) says the focus should be on building the types of homes that Canadians want to live in. For example, in Calgary the demand for single-family homes – rather than high-density condos or multi-family developments – is still on the rise. A 2015 survey by the Smarter Growth Initiative found that 51% of Calgarians considering buying a residence preferred single-family, detached homes. 

“In order to address rising house prices and declining affordability, we have to look at housing supply – not just how much, but where and what kind. There is a significant gap between the type of housing Canadians want to live in and what’s being allowed to be built. We are seeing a major shortage of family-oriented housing.”

- Kevin Lee, CEO of the Calgary Home Builders’ Association

The CHBA supports a government action plan to address supply-side issues by increasing the supply of entry-level and medium-density housing.

What’s Calgary’s supply-side situation? The Suburban Residential Growth publication by Calgary Growth Strategies Planning and Development looks at how housing will increase to meet our needs from 2017 to 2021

June 22nd, 2018
Updated: August 10th, 2018

A CMHCYa  report says housing affordability is a supply issue.