Is Chasing Too Many New Homes Canada’s Next Big Failure?

Is 500,000 new homes a year really what Canada needs to solve the housing crisis?

In this episode of the Missing Middle’s Classonomics Podcast, Mike Moffatt and Sabrina Maddeaux examine whether Canada's headline housing targets still make sense now that immigration has slowed and population growth has changed. They discuss why housing starts can be a misleading metric, why the type of housing being built matters just as much as the number of homes, and what governments should actually measure if the goal is restoring affordability.

Topics covered:

• Why the 500,000-home target may no longer be necessary
• How immigration affects housing demand
• Why housing starts don't tell the full story
• The shortage of family-sized homes
• High-rise condos vs. townhomes and detached homes
• The hidden costs preventing more housing from being built
• What metrics governments should focus on instead of housing starts
• Can Canada restore middle-class housing affordability within a decade?

Subscribe for more conversations on housing, affordability, economics, and public policy.

Chapters:

00:00 - Does Canada Really Need 500,000 Homes a Year?
01:40 - Where Did the 500k Housing Starts Target Come From?
02:47 - The Metrics Governments Should Focus On Instead
04:11 - Balancing Housing Supply with Immigration Demand
05:21 - The Population Math: Why 500k is Overkill
06:40 - How Developers Bet on Future Immigration Policy
08:39 - Why the Type of Housing Matters (High-Rises vs. Townhomes)
10:12 - How Many Homes We Actually Need to Build
11:08 - Solving the Crisis by Lowering Construction Costs
13:04 - Will Baby Boomers Free Up Suburban Housing?

Research/links

The Impossible Trinity that Broke Canadian Housing

https://open.substack.com/pub/missingmiddleinitiative/p/the-impossible-trinity-that-broke?utm_campaign=post-expanded-share&utm_medium=web

The Housing Trilemma: Why You Can't Afford a Home

https://www.missingmiddleinitiative.ca/p/the-housing-trilemma-why-you-cant 

Hosted by Mike Moffatt & Cara Stern & Sabrina Maddeaux

Produced by Meredith Martin

Funded by the Neptis Foundation https://neptis.org/

Transcript

SPEAKER_01 0:00

Industry fully recognizes that really what they're betting on is the future path of immigration policy more than anything else.

SPEAKER_00 0:09

The starts is also a number that they seem to constantly manipulate, right? What does that mean? Is that single-dached homes? Is it just any unit? Is it dorms as well? Is it long-term care homes, right? Class Enomics, hosted by Sabrina Mado and Mike Moffat. During the 2025 election, the Federal Liberal Party made a campaign promise that they would double Canada's current rate of residential construction over the next decade to reach 500,000 homes per year. So far, it's not going well. Housing starts have been stuck at the 250,000 level, and the Canada Mortgage and Housing Corporation forecasts that starts will actually fall each of the next three years. Analysts have questioned whether or not that rate of home building is even possible. But now with Canada's population growth slowing and the aging of the baby boomers, analysts are also questioning whether or not building a half million homes each year is even necessary. Mike, you are one of those analysts and you've done a lot of research on housing targets. Does Canada really need to build 500,000 homes a year?

SPEAKER_01 1:08

Short answer, no. Back when Canada's population was growing by a million people per year, we would have to build that many homes, or actually even more than that, just to keep pace. But since the federal government has reduced immigration targets, it's scaling back on the number of non-permanent residents in Canada. You know, half a million a year is frankly overkill.

SPEAKER_00 1:29

That's interesting. So I'm curious where the Liberal Party got their 500,000 target to begin with. Did it just sound like a good number, or were they basing this on, you know, prior immigration targets?

SPEAKER_01 1:40

So we can't pin this one on the liberals, or at least not totally. The targets themselves come from the CMHC, specifically a series of reports that examine housing shortages. Their June 2025 report estimated that Canada needed to hit around 430,000 to 480,000 housing starts a year to restore affordability. So kind of in line with the liberal promise. And these are really solid reports. You know, I would say their methodology on how they arrive at that figure. It's a bit opaque. I'd like to see a little bit more transparency in their model, but it's a good report. And the thing I really like about it is that it recognizes the link between housing supply and affordability. So their estimate on the size of housing shortages or how many houses you need each year is a function of the overall level of affordability you're trying to target. If you want to get deep affordability, you got to build more homes. If you're less ambitious, you you build fewer homes. Though all of this housing starts discussion makes me believe that governments and not just the federal governments are overfocused on the wrong targets because the general public doesn't care about how many housing starts there are. They care about whether or not they can afford a home. So I think governments might be better off focusing on metrics that the general public can relate to. Like in your mind, like what would the housing market look like if the middle class housing crisis was over? And you know, what data would you be looking at?

SPEAKER_00 2:59

You're right. That the public cares about whether they can afford rent or a home and a home that they want to raise a family in. So the government ultimately should be focused more on metrics that show whether that is possible. Now, I think housing starts, they feel that's something they can control. It's an easy metric, and it's less complicated than talking about other areas of supply and demand like immigration. But really, government should be focused on things like price-income ratios, the proportion of young people still living at home with their parents, home ownership rates, and also whether the housing supply is properly allocated in terms of, you know, the number of people living in a home versus the number of bedrooms. Can seniors downsize if they want to in their own communities? But all of the stats really related to those things probably aren't looking too good and are much less favorable to governments and going to be harder to fix long term. So I can see why they would just like to go with starts. And starts is also a number that they seem to constantly manipulate, right? What does that mean? Is that single detached homes? Is it just any unit? Is it dorms as well? Is it long-term care homes, right? So I think that's why a lot of governments turn to starts as an easy indicator to point to.

SPEAKER_01 4:11

Yeah, I I think you're right. And I think the fact that it does kind of obscure what what's going on may actually be benefit to governments, not a problem, right? Because if you focus on price, you know, then you kind of raise questions of like, do you want my existing home price to go down? Even uh a metric like a price to income ratio, you know, still kind of invites those questions. So I get what governments are doing on using housing starts. It's a bit easier to measure. They've got an existing methodology, it's not as controversial. But at the same time, I do think we would be a little bit better off if governments had a little bit more transparency on exactly what they were trying to accomplish.

SPEAKER_00 4:53

Yeah. And starts are obviously focusing on the supply side of the issue, where there's also the demand side, which has, you know, really gone off the rails due to unsustainable immigration targets in recent years. So these targets we're talking about for starts do assume that the population is going to grow at a certain rate. But we have seen a lot of the pressure taken off of the housing market through reductions in immigration. Although, you know, my view that there need to be further reductions. Do you think it's enough to fix it over time?

SPEAKER_01 5:20

Yeah, well, it certainly has taken the pressure off. And the federal government admits that themselves. They've said so outright in the last budget. But once the reductions in non-permanent residence is fully phased in a couple of years from now, Canada's population is set to grow between about 300,000 and 400,000 people a year. Now, you know, just do the math on that. You don't need to be building 500,000 homes a year in a country whose population is growing by 300,000 to 400,000. You know, you don't need two, two homes for one person, but you do need to build some. You know, it's the amount isn't zero if you're growing that much. And we still have a large pre-existing housing shortage to account for. So you need to build quite a few homes, but it's certainly taken a lot of the pressure off.

SPEAKER_00 6:02

Yeah, it's that pre-existing shortage that I'm very much concerned about because even if the immigration targets are brought down over the next couple of years, we had such unsustainable explosions in numbers over the last five years, in particular, even 10 years, that we have a lot of catching up to do. And then when we talk about starts, well, what types of starts? I'm also concerned that long term the government hasn't really bought into the idea that immigration policy needs to be sustainable and matched to housing targets and healthcare capacity and infrastructure as well. And that this is a quick patch over the next couple of years, and then we'll just go back to where we were before.

SPEAKER_01 6:40

Yeah, that is a real risk. And you know, housing needs targets are highly dependent on immigration policy assumptions. You know, if the population growth rate changes, so too does future housing needs. And, you know, somebody who talks to a lot of apartment developers, for instance, apartment developers right now, I find are in one of two camps. You know, you've got the one camp saying, we've built a lot of apartments, we don't really need any more, we're scaling back, we're gonna be investing in other stuff, government bonds or whatever. And then you've got some that are saying, no, no, we're we're gonna keep building. We think the country needs more, and so on. And I find the one thing that divides those two camps is their assumptions around the future path of immigration that the developers who are continuing to build are kind of making the same bet that you've kind of discussed, where they're saying, you know, we don't think uh it's uh politically sustainable to have immigration rates this low. We think governments are going to turn the taps back on for economic reasons, you know, because the business community is going to want more labor and so on. So we're making a bet that immigration is gonna go up and we want to have the uh units there uh to uh account for that incor increased demand. So it is really funny how industry fully recognizes that really what they're betting on is the future path of immigration policy more than anything else.

SPEAKER_00 8:05

Yeah, that's really interesting. Um, and that's why I think immigration will continue to be a top three issue uh when they're pulling the public over the next few years, because there's gonna be a lot of pressure on both sides. And I think that politicians in general have troubled making hard choices, and immigration reductions are by nature very difficult choices, and especially in the um federal liberal party that obviously now has a majority over the next two years. They've traditionally been very pro-large mass immigration, and there's gonna be a lot of ideological pressure from within as well to return to that.

SPEAKER_01 8:38

Yeah, I do think it is probably the number one uh issue worth watching, uh, because as you know, recognize it affects the kind of demand and supply of everything, and there is a lot of uncertainty there. Now, when we go to housing, you know, we can talk about you know the number of people, the number of homes, but you've also mentioned a couple of times that what we build also matters. You know, for example, high-rise apartment units house roughly half as many people as grand-oriented homes like townhouses. You know, high-rise apartments, you're you tend to be talking one, maybe some two bedrooms. Town homes tend to be three, four bedrooms or so. So our housing targets and housing stars data is a bit misleading because it treats all units the same. It treats those one and two and studio high-rise apartment units, they all count as a start, the same as a three or four bedroom townhome. That's also a start. And because over the last 20 years, Canada has shifted from building mostly ground-oriented housing, like those townhomes and single detached and so on, to mostly high-rise apartments, the types of units have changed and the amount that each unit can house has changed. So there's none of that's to suggest that uh building high-rise is bad. Like we need lots of it, but it does mean that building five high-rise units, you know, doesn't have the same impact on the housing crisis as five town homes. So if we're going to be relying on high-rises to fill some of this housing shortage, we need to be building closer to 10 of them to have the same relative impact as building five town homes. And our data doesn't really capture that.

SPEAKER_00 10:11

And if we are building high rises, then they need to have, you know, livable units with good layouts, with more bedrooms as well, because the real shortage is the shortage of family-sized homes. And that can be in, you know, high rises, it can be town homes, but single detached is really what a lot of people envision when they want to raise a family. And there's still such a shortage of those, and certainly anything that resembles affordability near a major economic center. So, with that in mind, how many homes do we actually need to be building each year?

SPEAKER_01 10:40

Well, it does obviously depend on the types of homes, but at current immigration rates, it's somewhere in the 200,000 to 300,000 a year range, which is much more manageable. Now, it also depends on how aggressively we want to close the affordability gap because we do have a big pre-existing shortage. So if we want to hit affordability targets sooner, you know, we're probably looking more at the 350,000 range or so. If we want to scale back and, you know, take our time about it, then you know, we're probably closer to the 250,000. Again, noting that what we build matters and matters a lot. But regardless of the type of homes, they're not just going to happen. You know, that those homes won't get built if people can't afford to buy or rent them, is just simple economics. So Canadian governments need to do a lot more to get the cost of delivery down, the cost of construction down. And that includes everything from land costs to approvals costs to taxes and fees like development charges and HST. But I would say that all of this is solvable within the next decade. We don't need to hit 500,000 housing starts a year unless you know we have some big changes to immigration policies. So I think if governments are willing to make some tough decisions on issues such as taxes and land use policy and how infrastructure is funded, I think we can get there, you know, get to middle class affordability within the next decade or so.

SPEAKER_00 12:04

So that's a big statement to underline that. If immigration stays lower at current levels, in other words, we don't really need those 500,000 housing starts a year.

SPEAKER_01 12:14

Yeah, and that's a good thing because Canada's never even hit 300,000 housing starts a year. Now, I do think, you know, half a million a year would be possible with some rather radical government reforms on land use and zoning and so on, you know, reforms that they haven't really shown much of a willingness to do. And, you know, half a million a year could be needed if, you know, we uh decide to aggressively increase uh population growth and immigration. You know, but at the end of the day, like your country's only growing by 300,000 people a year. You don't need to be building 500,000 homes a year, uh, even if you're dealing with a pre-existing shortage. Like eventually those homes catch up with population growth and do so pretty quickly.

SPEAKER_00 12:54

And our demographics also working in our favor here as baby boomers will inevitably be turning over a lot of those larger suburban homes over the next 20 years.

SPEAKER_01 13:03

Yeah, that's that's absolutely true, though. We have to note that those suburban homes have actually traditionally been very popular with newcomers to Canada, along with first generation Canadians. So, yes, a lot of them will be turning over, but many of them will be inherited by family members. And others, I think there will be a fair bit of demand for those homes, particularly from relatively new Canadians. Yep.

SPEAKER_00 13:25

So at the end of the day, what we build really matters. And all of these housing start targets from federal, provincial targets, they all seem to miss out on that nuance. So we need a mix of housing types and simply building half a million shoebox condos isn't going to cut it.

SPEAKER_01 13:40

Yeah, exactly. If we had much more nuanced targets, if we focused more on the cost of delivery rather than the number of housing starts, we could end this crisis much faster. And we certainly wouldn't have to wait until the year 2060, like the federal housing advocate suggests.

SPEAKER_00 13:55

Yeah, we definitely do not want to wait till 2060 for affordability. I think people will be in the streets well before then. Um, but yeah, it can't just be about numbers. Quality of life is important and matching homes to what people want and need to live in. So our goal shouldn't be just to warehouse people, but rather to create strong communities where kids can go outdoors and aren't trapped in tiny rooms doom scrolling on their phones. Thank you everyone for watching and listening. And to our producer, Meredith Martin and our editor, Sean Foreman.

SPEAKER_01 14:23

If you have any thoughts or questions about being trapped in a small room doom scrolling on your phone, please send us an email to missingmiddlepodcast at gmail.com.

SPEAKER_00 14:31

And we'll see you next time.