Prime Minister Justin Trudeau’s ambitious promise to build nearly four million new homes by 2031 is in jeopardy after the construction sector entered another slump due to fewer residential starts.
The latest GDP report by Statistics Canada shows that despite the Liberal government’s pledge to dramatically increase supply, the construction sector is on the downturn.
In the wake of a modest 0.3% increase in Canada’s real GDP in April, the construction sector reported a 0.4% contraction, marking the largest decline across all industries.
This slump is primarily attributed to a significant 2.3% decrease in residential building construction, which has seen the steepest fall since May 2023.
The downturn reflects a broader trend of reduced activity in new home construction and renovations, with levels now 24% below the peak of April 2021.
Despite signs of recovery in the construction industry in the first few months of 2024, with gradual growth in the first quarter, the recent figures raise concerns about the sustainability of this recovery.
The construction industry’s struggles come at a time when the Canadian government has committed to bolstering the housing supply, a promise that now seems more challenging than ever.
The Canadian Urban Institute recently highlighted the enormity of this task necessitating an infrastructure investment of upwards of $750 billion.
Meanwhile, the Canada Mortgage and Housing Corporation has underscored the urgency of the situation, alternatively stating that an additional 5.8 million new homes were required.
However, the current pace of housing starts won’t be able to meet the most conservative of targets. To achieve the ambitious goal, a significant escalation in construction activity is imperative. The financial implications would be required.
According to the Federation of Canadian Municipalities, considering the infrastructure cost for each new home being $107,000, the sector will need $620.6 billion for the projected 5.8 million homes. That number went up to $758 billion when accounting for other figures related to infrastructure.
