Mark Carney wants to “build, baby, build” to fix Canada’s housing crisis—but supply alone can’t fix affordability. Decades of underinvestment have left the federal government devoid of expertise on how to effectively fund housing, creating major challenges for a housing boom.

The numbers are daunting. The government plans to create a new federal housing entity to help construct 500,000 homes per year by 2035, and will spend $10 billion to finance organizations that build affordable homes.

Carney says the government wants to get “back into the business of building affordable homes.” That business peaked in the 1970s, when the government poured money and resources into boosting Canada’s housing market. In 1976, construction began on a record 273,203 homes—a number the country has never reached since, despite the population tripling. Back then, almost half of those housing starts benefited from some form of public funding. 

The 1970s housing boom had two crucial factors that Carney is trying to revive: big federal funding and a lot of social housing developments.  

The building frenzy was overseen by the federal government’s housing Crown corporation, the Canada Mortgage and Housing Corporation (CMHC). By the 1980s, its presence was vast, with about 90 offices across the country. These offices supported a network of building inspectors, architects, appraisers, market analysts and loan officers, according to Steve Pomeroy, executive advisor and industry professor at McMaster University’s Canadian Housing Evidence Collaborative. Working relationships with social housing organizations also resulted in the construction of roughly 25,000 affordable homes per year from the late 1960s to the early 1980s.   

That changed in the mid-’80s when the federal government began shifting responsibility for housing to the provinces. In 1993, Canada’s federal budget removed all new funding for non-market homes—housing that’s not owned by the private sector, including co-ops and housing operated by non-profits or the government. Only B.C. and Quebec continued to provide funding for their non-market housing sectors. 

Pomeroy said CMHC staff, himself included, either moved to the provincial level or out of the government-run housing business altogether. By the 1990s, there were 53 CMHC offices, and by the middle of the decade, federally funded affordable housing units dropped from roughly 43,000 per year in 1970 to under 5,000 units in 1995, where they stayed until 2016. 

“The non-profit housing sector got quiet,” said Jill Atkey, CEO of the B.C. Non-Profit Housing Association. “Without investment from senior levels of government, affordability couldn’t be achieved.”

Atkey said expertise in the non-profit housing sector was eroded or outsourced because projects weren’t happening. As funding went down, so did the number of community housing units. Today, the CMHC has six offices—five regional ones and its headquarters in Ottawa. 

Now, Carney wants to create a new federal entity: Build Canada Homes. The Liberals say it will act as both an affordable housing developer and financer, absorbing all relevant programs from the CMHC and building at least in part on public land. 

But most of the expertise of how to finance affordable housing—and the local connections to do so—now lies with provinces and municipalities as the levels of government that have been responsible for housing for decades.  

“Municipalities are the knowledge keepers of non-profit and deeply affordable housing in their communities,” said Alexandra Flynn, director of the Housing Research Collaborative, a research hub based in Vancouver, and an associate professor at the University of British Columbia’s Peter A. Allard School of Law. These relationships, she said, have been forged through decades of work on zoning, building and funding.

And Carney’s plan to reassert the federal government’s place in housebuilding will fall short if it takes the same approach as his predecessor. The National Housing Strategy, launched by then-prime minister Justin Trudeau in 2017, was, according to Pomeroy, the equivalent of the government jumping into the deep end of a pool with no life jacket and then realizing it had forgotten how to swim. 

One of the problems with the strategy was that most of its funding was delivered through new federal initiatives, with developers often waiting almost a year and a half to hear back from the CMHC about their application, let alone start building.

If the Trudeau government had built on provincial expertise, it would have been fine, Pomeroy said. In trying to take everything over, Ottawa revealed itself to be incapable and incompetent.

“There was certainly a huge amount of frustration from the folks that were trying to access those programs,” Pomeroy said, and many projects didn’t go through. Atkey said non-profits had to stack funding from various programs that weren’t designed to work together. 

Carney says building 500,000 homes a year will require “both the private and public sector,” and the prime minister has acknowledged the need to build more social housing. The government has yet to say much about how it will define and work with the “affordable home builders” set to receive billions of dollars of funding—whether they will be private sector, public or some kind of collaboration. 

Right now, 95 per cent of Canada’s housing stock is built by the private sector, compared to just 3.5 per cent for social housing—less than the OECD average of 7 per cent. Ownership makes up a disproportionate share of the housing supply in Canada, with rental demand increasing as more and more people are priced out of buying a home. 

Pomeroy’s research suggests that Canada spends huge sums subsidizing affordable home builds only to lose 11 low-rent units for every new one added. The cause, he said, is that rent hikes and demolitions remove affordable homes faster than they can be replaced.

“The model of investor-financed housing isn’t working, and I think we’re in a huge moment to change that,” said Cherise Burda, incoming director of the Ottawa Climate Action Fund and former executive director of Toronto Metropolitan University’s City Building Institute. Burda said there’s a role for private developers, but that, for too long, officials have been asking them to deliver affordable housing when it’s not their job to do so. “Let’s get shovels in the ground that aren’t dependent on that model,” she said. 

Scaling up not-for-profit housing can help make housing more affordable for moderate- and middle-income families, she added. A 2023 study from Deloitte and the Canadian Housing and Renewal Association (CHRA) found that building more community housing drives down real estate costs across the market and boosts productivity across the country.

The report found scaling Canada’s community housing sector to the size found in similar high-income countries would boost national productivity by 5.7 to 9.3 per cent and add $67 billion to $136 billion to Canada’s GDP. These economic boosts aren’t from one-off construction jobs, said CHRA executive director Ray Sullivan, but rather the effect of improved labour mobility, rises in disposable income and more. Sullivan said the analysis establishes that productivity goes up with the share of community homes, and vice versa—but only for non-profit housing, as the relationship “does not hold” for private-sector homes.

The report estimated it would take an additional 371,600 community housing units in Canada to reach that 7 per cent average. That number doesn’t have to be just new buildings—not-for-profit housing developers can purchase properties, and the Liberal plan has endorsed the “conversion of existing structures into affordable housing units.” 

Rebuilding the non-profit housing sector may also be crucial to weathering the cost of trade instability, Burda said, since it is not subject to the same speculation as the for-profit housing market, and project costs are somewhat lower without a profit margin. And the sector is financed, meaning the government will get its money back from non-profit housing providers. 

Tim Ross, CEO of Co-operative Housing Federation of Canada, an organization representing more than 900 housing co-ops across the country, said the group’s research comparing private-sector rents and co-ops estimates upwards of $400 in savings on rent per month. He adds that his organization wants to get building sooner rather than later, as trade uncertainty complicates the business of importing building materials and components. 

Carney has pledged to cut red tape to speed up building, including lowering municipal development fees and reducing zoning restrictions. Atkey said that whenever there is a non-profit element to a build, the applications are nearly 100 pages with strict oversight. She welcomes the scrutiny, but doesn’t see the same rigour applied to the private sector. 

It’s not just a matter of supply, but what kind of people can actually access it. The 500,000 homes per year might help the upper rental market years down the line, Pomeroy said, “but it certainly wouldn’t get folks out of encampments, and it certainly wouldn’t help people in the middle.” Burda said big targets can result in big projects, but there’s a risk of ending up with a lot of housing that isn’t really affordable. 

Case in point: Toronto. The closest Canada has come to its 1976 record for housing starts was in 2021, when the GTA’s investor-backed condo-building boom contributed to construction starting on 271,198 new projects across the country. Yet that boom was a mirage of sorts, with Canada’s condo financiers now fleeing as development charges surge and sales slump. The resulting condo ghost towns are a reminder of what can happen when “build, baby, build” goes wrong.