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CHBA Points to “Missing Middle” in Housing Affordability Crunch

March 3, 2017:  The Canadian Home Builders’ Association (CHBA) today released an in-depth analysis of key factors underlying current housing market conditions.

This research report: The Housing Supply Deficit – Not Enough Homes for Families with Young Children points to a significant and growing mismatch between housing demand and what the residential construction industry is able to supply given today’s planning and zoning patterns and lack of available serviced land.  In fact, the report notes that if the current trends continue, Canada will see a shortfall of some 300,000 family-oriented homes over the next decade.

CHBA’s data show that demographic factors are actually driving demand for ground-oriented homes suited to young, first-time home buying families, as Canada experiences something of a ‘baby boomlet’.  At the same time, aging Baby Boomers and older Canadians are not ‘downsizing’ from their detached homes in the numbers predicted, preferring to age-in-place. Many are even trading up to larger single-family units, resulting in fewer ground-oriented homes being ‘recycled’ to younger owners.

“There has been a lot of commentary around what’s driving house prices in markets like Vancouver and the GTA.  Much of this overlooks the fundamental factors of supply and demand, and the increasing number of young families trying to achieve home ownership,” noted CHBA CEO Kevin Lee.

“CHBA’s research shows that current patterns of urban development fail to address the needs of young families looking for a place to call home. There is a distinct lack of higher-density, ground-oriented homes they can afford, such as townhomes, stacked towns and similar housing formats.  This is the ‘missing middle’ in our largest and fastest-growing communities,” Mr. Lee stated.

The effects of this demographic demand are amplified significantly by supply constraints including lack of infrastructure and developable land, development restrictions, ‘NIMBYism’, municipal policies favouring high-rise development and other factors.

The resulting decline in construction of ground-oriented, family-friendly homes is significant.  Nationally, there has been a 27% decline in the construction of such homes since 2007. In rapidly growing markets the decline has been much more dramatic.  For instance, recent data for the GTA showed that inventory of ground-oriented homes has fallen 89% in the last decade, and sits at historic lows.  There is a particular shortage of higher-density, ground-oriented attached homes with ready access to transit, which increasingly represent the ‘missing middle’ of urban housing stock.

“In markets experiencing strong economic growth and in-migration, these supply factors are a big part of what is fueling rapid price appreciation within the ground-oriented housing segment.  While some observers look for other explanations, and there are indeed other contributors, the ‘law’ of supply and demand remains pervasive,” noted Mr. Lee.

“What we are seeing is the millennial generation really struggle to find a place to live and raise their families in our largest cities, and this has worrying longer-term implications for them, these communities, and the economy at large,” Mr. Lee stated.

“Although there has been a lot of focus on trying to dampen prices, a big part of the solution is enabling a housing supply response.  We’re not talking about ‘sprawl’ here, just about building smarter communities, including infill projects and transit-oriented development, that young families find welcoming and manageable with young children,” he concluded.

The CHBA report includes a number of recommendations to the federal government on how it can act to help address this problem.  You can find the complete report here.