Private sector must lead Canada’s housing response, Carleton expert says

Canada has made meaningful progress on housing reform, but the country remains far from solving its housing affordability and supply crisis, according to Ian Lee, associate professor at the Sprott School of Business at Carleton University.

“Is housing reform working in Canada?” he asked during a presentation at Housing Summit 6.0 hosted by the Residential Construction Council of Ontario (RESCON). “I’m going to give a qualified yes and a qualified no. It is sort of working.”

While acknowledging governments have begun taking steps to address housing challenges, Lee stressed the reforms implemented so far are insufficient to close a massive and growing housing supply gap.

“Good stuff has happened,” he said. “We’re going in the right direction, but we’ve got to do more.”

Lee pointed to data showing Canada continues to build homes at a rate that falls well short of demand. Housing starts are hovering around a quarter of a million units annually, but CMHC estimates the country needs between 400,000 and 470,000 new homes each year to address affordability challenges and eliminate the accumulated supply shortfall.

“The numbers clearly show that we are not building enough,” Lee said. “It is crystal clear that we are still falling behind.”

The problem is compounded by years of rapid population growth that significantly outpaced new housing construction. Although the federal government has reduced immigration targets and moved to stabilize population growth, Lee noted the imbalance created over the past decade continues to have lasting consequences.

According to Lee, even with recent adjustments to immigration policy, housing shortages are unlikely to disappear anytime soon. The cumulative supply gap has become so large that it will take years of sustained construction activity to bring the market back into balance.

He highlighted the enormous economic value generated by residential construction, arguing policy-makers should recognize the sector’s importance to Canada’s economy.

Residential construction activity in 2025 supported more than 1.2 million jobs, generated $90.1 billion in wages and produced more than $213 billion in economic investment.

New home construction alone accounted for approximately 259,000 housing starts, supporting more than 515,000 jobs, generating nearly $39 billion in wages and creating close to $92 billion in investment activity.

“Your industry is hugely important,” Lee told the audience. “1.2 million jobs, $90 billion in wages and more than $200 billion in investment.”

Given its economic impact, Lee argued governments should focus on removing barriers that prevent the industry from delivering the housing supply Canadians need.

While many governments have launched housing initiatives and incentive programs in recent years, Lee said public spending alone will not solve Canada’s housing shortage.

“Government programs are not going to solve housing shortages,” he said.

He pointed to programs designed to encourage rental construction and support housing development, noting while some initiatives have helped increase rental activity, they are only making a modest contribution when viewed against the scale of the national housing deficit.

Referring to major federal housing initiatives, Lee described the impact as “barely moving the needle” relative to the country’s overall needs.

“The solution is the private sector,” he said.

A central theme of Lee’s presentation was his criticism of municipal development charges (DCs), which he described as one of the most significant contributors to housing affordability challenges in Canada.

“Our goal in our country should be zero development fees,” he said. “They are destructive and harmful and hurt our young people and new Canadians.”

While municipalities argue the charges are necessary to pay for roads, sewers, parks and other infrastructure, Lee said the costs are ultimately passed directly to homebuyers.

“They’re being passed on to individual homeowners and driving up the cost, making housing ever less affordable for young people,” he said.

According to a CMHC study, DCs account for between eight and 16 per cent of the cost of a new condominium in Ontario. For single-detached homes in Toronto, DCs can represent roughly nine per cent of the purchase price.

Lee noted DCs on a new home can exceed $100,000 in many GTA municipalities and are among the highest in the country.

Lee pointed to research suggesting eliminating DCs in Toronto could result in an additional 10,000 to 16,250 housing units being built annually.

“Get rid of the development fees and we can substantially reduce the price of new housing,” he said.

Beyond DCs, Lee said municipalities must do more to reduce lengthy approval timelines and bureaucratic delays that increase project costs and limit housing production.

“Large cities are not doing enough,” he said. “They’ve got to reduce red-tape delays.”

He noted jurisdictions with shorter approval times and lower regulatory burdens generally experience lower housing costs and stronger housing supply growth.