Build Canada Homes yet another good first step
Prime Minister Mark Carney, pictured with Housing and Infrastructure Minister Gregor Robertson, pictured Sept. 14, announcing Build Canada Homes. / TWITTER PHOTO
During his heyday in office in the 1980s, President Ronald Reagan popularized a phrase that would likely resonate today with anyone who tries to build new housing in Canada: “The most terrifying words in the English language are: I'm from the government, and I'm here to help.”
For Canadians, the legacy of government involvement at all levels in housing development over the past three decades has, indeed, been terrifying, resulting in the housing supply and affordability crisis they are suffering under today.
It's a legacy of steadily thickening, more complex and more time-consuming municipal zoning regulations. In this era, a pro-NIMBY bias has placed a heavy burden of proof squarely on developers to justify their plans over a reflexive chorus of anti-development activists and neighbourhood associations who have had more sway over decision makers.
Worst of all, it is a period in which cascading forms of taxation paid by developers at all levels of government, from municipal development charges to the HST/GST, have discouraged new investments because the cost of development is simply too high.
In fairness, credit must go to the federal, provincial, and municipal governments who, in the last few years, have launched efforts to lift the dead weight of regulation and taxation off the development process and to incentivize home building across the housing spectrum. But the progress has been uneven. For example, the spectre of some municipalities deciding to increase development charges even as they have received new federal housing funds through the Housing Accelerator program was truly depressing to behold.
The meagre results speak for themselves: housing starts in 2024 were around 245,000, only marginally above the approximately 240,00 constructed in 2023. This is roughly half of the 430,000 to 480,000 annual housing starts that CMHC, in its most recent Housing Gap Estimate, estimates would be needed to achieve housing affordability by 2035.
Long overdue federal return to social housing
Now comes Prime Minister Mark Carney’s first foray into the housing supply and affordability crisis: Build Canada Homes (BCH). At first glance, the very idea that the federal government created a whole new agency to build homes seemed just another example of the Liberal reflex toward policy gigantism that seems so characteristic of Prime Minister Justin Trudeau.
The thought that BCH would actually see the federal government enter the broad housing market sparked worries that the agency would destabilize an already weak, undercapitalized housing market. This week, the Prime Minister announced details of how BCH would work, putting those fears to rest. The announcement made clear that the agency will focus “primarily on non-market housing, supporting a mix of income needs as part of a national effort to double housing construction, restore affordability, and reduce homelessness.” This marks a long-overdue return of the federal government to the social housing space that it wrongly abandoned three decades ago. Indeed, its ambition to “help create the conditions for a high-capacity, growth-oriented non-market housing sector” is spot on.
Moreover, the primary instrument is “building the long-term, predictable demand for Canadian factory-built housing,” which targets an innovative industry with enormous potential to spur jobs and economic growth. At the same time, it will be important for BCH investments to target scaling existing manufacturing capacity rather than trying to invent or invest in new ones; the discredited practice of government “picking winners” that has never ended well for the federal government or Canadian taxpayers.
Getting the housing market right is the heaviest lift of all
While BCH is welcome, it is important that we place it in the context of the sheer scale of Canada’s housing capital challenge. Build Canada Homes has been capitalized at $20 billion, an amount that, by all accounts, will strain the federal government’s already wafer-thin fiscal capacity. Capital for housing competes against all other potential investments, making it scarce when there are threats and uncertainty. Over the next 10 years, we will need $2-3 trillion to address the broad range of Canadian housing needs, well beyond the capacity of all levels of government combined.
In other words, the private sector will continue to do the heavy lifting on housing, as it always has. To that end, the lift simply has to be made lighter. To his credit, in addition to featuring BCH in the Liberal election platform, the Prime Minister, who has a much deeper understanding of capital markets than any of his predecessors, made it clear that “We need a market that works. A system with less red tape, with barriers removed, and that incentivizes building.”
As we have seen in recent years, commitments to get the market right in this way are easier made than done; requiring a genuine all-hands-on-deck mentality that unites governments at all levels, builders, unions, and developers in a common cause. Forging this alliance is all the more challenging in 2025 as Canada teeters on the edge of a recession, a fundamentally existential threat to any form of capital formation.
In the end, Build Canada Homes is a good first baby step for the Carney Liberals, focused on housing cohorts that sorely needed federal involvement. However, Canada cannot afford any more baby steps on housing. We need bold, ambitious action that cuts through the complacent business-as-usual assumptions and habits that got us the epochal fix we are in.
Only then will the government's reflex to say it is here to help be a little less terrifying.
