The Parliamentary Budget Officer (PBO) has released a report warning that Canada must build 3.2 million new homes over the next decade to close the country’s housing gap. Current projections, however, indicate only about 2.5 million homes will be completed by 2035 — leaving a shortfall of roughly 700,000 units.
According to the report, Canada is expected to build an average of 227,000 new homes annually between now and 2035. To meet demand, that number would need to increase by at least 65,000 per year. PBO Yves Giroux noted that in addition to current demand, years of “suppressed demand” — when Canadians have been priced out or constrained by low vacancy rates — continue to weigh heavily on the market.
Vacancy rates fell to 3.3 per cent in 2024, well below the historic average of 6.4 per cent seen between 2000 and 2019. Low vacancy levels, Giroux explained, limit choice, drive up rents and home prices, and force many households to remain in inadequate housing situations.
The PBO also pointed out that reduced immigration targets, introduced last year, are expected to slow the rate of new household formation, but will not eliminate demand pressures. “Reducing future intakes… will contribute to reducing the pressure, but it will not make that pressure entirely go away,” Giroux said.
While the PBO expects increased construction in the next three years before returning to historic averages, the gap remains significant. The report does not factor in the federal government’s recent housing commitments, including the Liberals’ election pledge to double housing construction.
Giroux emphasized that the ultimate success in closing the gap will depend on how effectively Ottawa and provincial and municipal governments implement housing plans. “Given that we haven’t seen how these projects or announcements will indeed materialize and translate, it’s too early to tell whether these will be effective,” he said.