In November 2023, CHRA, Housing Partnership Canada, and our sector partners released our economic study, The Impact of Community Housing on Productivity. This study, authored by Deloitte, finds a causal connection between the proportion of community housing within the overall housing stock and gains in economic productivity.

In our second piece in our series of blog posts examining the study, we’re examining the research and context behind the report. Read on to learn more.

 

Canada’s housing crisis

The housing crisis is a top concern for households across Canada, with those with low or unstable incomes bearing the brunt of its effects.

Key background:

• Housing affordability has deteriorated over the past two decades in Canada (according to the Bank of Canada’s Housing Affordability Index).
• Approximately 2.6 million people are in core housing need, or 1 in 10 households.
• Canada’s proportion of community housing within the overall housing market lags far behind most other G7 countries at 3.5%.
• Most of Canada’s existing community housing stock was built between the 1960s and 1980s.
• Renter households have a core housing need rate almost four times higher than those who own their homes.

Factors contributing to the housing crisis

Supply and demand affect the entire housing continuum.

Demand factors increasing housing prices

• Higher disposable incomes
• Population growth
• Low mortgage rates
• Expectation of rising house prices
• Changes in the liquidity of the housing market
• Bank of Canada’s low policy rates fueling demand and encouraging accumulation of mortgage debt
• Investors capturing a larger share of housing purchases

Supply factors

Long timelines for approvals, construction delays, availability of land, land-use regulations, cost of materials, and a shortage of workers combine to make it difficult to increase housing stock quickly. CMHC estimates that to restore affordability to levels seen in 2003 and 2004, 3.5 million more housing units are needed by 2030.

Researchers and advocates have concluded that to restore affordability, governments and the sector must create housing supply that accounts for the entire housing continuum and is available along the range of socioeconomic status.

Currently, investments as a share of GDP are still below levels seen in the 1980s and have been insufficient to significantly increase the level of community housing stock as a share of total housing stock.

 

Canada’s productivity challenge

Canada’s economy also faces a productivity problem. Our labour productivity growth lags behind our international peers and has continued to decline in the post-pandemic period, with labour productivity declining for the fifth consecutive quarter in the second quarter of 2023.

Improving our productivity performance is essential for two main reasons:

An economy’s long-term ability to grow boils down to how many people can work. Canada’s aging baby boomer cohort will put downward pressure on labour supply despite high immigration levels. This means we will need to rely more on investment and productivity to grow our economy.

Productivity is the most important factor determining a country’s standard of living. The OECD projects Canada to have the lowest growth in real GDP per capita for advanced economies primarily due to low productivity growth. Though other factors contribute to this challenge, with evidence suggesting that firms are having trouble finding workers due to housing affordability, there is renewed interest in the link between housing affordability and productivity.

 

The relationship between community housing and productivity

The study reviewed five connections between affordable housing and productivity.

1. Thickness of the labour market. Location and affordability of housing play an important role in facilitating the matching of individuals to the right jobs.
2. Housing effects. Unaffordable housing, overcrowding, and poor living conditions can impact the wellbeing, self-esteem, and human capital of individuals.
3. Neighborhood effects. Supportive and accessible neighborhoods contribute to a household’s opportunities, which impacts their wellbeing and employee skill levels.
4. Price and rent effects. High household/rental prices impact the consumption, savings, and assets decision of a household.
5. Employer housing. In parts of the country where the housing crisis is acute, employees have difficulty finding adequate housing. When employers must provide housing as part of the terms of employment, it limits the ability of business to grow.

 

Stay tuned to the blog to learn about key takeaways and regional data from the report.

Check out The Impact of Community Housing on Productivity.