Housing Starts Decline Slightly in March Amid Growing Focus on Supply Crunch Concerns

The pace of housing construction in Canada dipped in March, with standalone housing starts coming in at 246,243 units, a two percent decrease from February, according to data released Tuesday by the Canada Mortgage and Housing Corporation.

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Historical Context

This follows an overall downtrend in housing starts that saw the six-month, seasonally adjusted moving average reach 252,497 units compared to the February reading of 253,296 units. It is essential to note that despite this decline, the level of housing starts activity in Canada remains historically high, hovering above 200,000 units since June 2020.

CMHC Chief Economist’s Insights

According to CMHC chief economist Bob Dugan, "On a trend and monthly (seasonally adjusted annual rate) basis, the level of housing starts activity in Canada remains historically high, hovering above 200,000 units since June 2020." However, he added that the trend in housing starts posted a small decline from February to March.

Regional Breakdown

Dugan also pointed out that the two percent decline in housing starts in Canada’s urban areas were largely driven by lower multi-unit starts, which fell five percent to 154,876 units. Conversely, there were higher single-detached starts in the month of March with an eight percent growth to 65,832 units.

Montreal’s Growth

Interestingly, Montreal was the only one of the country’s three major markets — Toronto and Vancouver being the others — to post a growth in total seasonally adjusted starts, largely driven by higher multi-unit starts.

The Federal Budget’s Ambitious Plan

This data follows the federal budget’s ambitious plan to double the pace of housing construction in Canada within ten years. It is a task rife with challenges, one of the most pressing being the shortage in labour needed to build up these homes. The minister of diversity, inclusion and youth of Canada, Ahmed Hussen, who has also been placed on the housing file, told Bloomberg News this month that immigration and investments in skills training were needed to address the shortage.

The Stakes are High

The stakes are high to get enough development off the ground as home prices soared during the pandemic. While rate increases from the Bank of Canada, such as the most recent 50 basis point hike, are expected to take some heat out of the market, the real estate industry continues to point to the dramatic mismatch between supply and demand as the driving factor making housing less affordable.

The Way Forward

While the decline in housing starts may seem like a cause for concern, it is essential to consider the historical context. The level of housing starts activity in Canada remains historically high, and the trend in housing starts posted a small decline from February to March. However, addressing the shortage in labour needed to build up these homes will be crucial in achieving the federal budget’s ambitious plan.

The Role of Immigration

As Ahmed Hussen pointed out, immigration and investments in skills training are necessary to address the shortage. This highlights the importance of a well-planned approach to immigration and skills development to support the growth of the housing industry.

Conclusion

In conclusion, while the decline in housing starts may seem like a cause for concern, it is essential to consider the historical context and the challenges that lie ahead. The federal budget’s ambitious plan to double the pace of housing construction within ten years will require careful planning and execution to address the shortage in labour needed to build up these homes.

References

"Canada Mortgage and Housing Corporation" (CMHC)
Bloomberg News
Postmedia

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