(Visual: Animated introduction featuring various shapes of houses and doors, as well as a search bar where “Canada’s housing market” is entered)

0:00:01

NARRATOR: You’re listening to “In-House,” Canada’s housing podcast, where we share the latest on Canada’s housing market.

(Text on-screen: In-House, Canada’s Housing Podcast)

(Visual: Animated transition to a shot of host Joelle Hamilton.)

0:00:17

JOELLE HAMILTON: Thank you for joining us today. I’m your host, Joelle Hamilton, and we have a really great podcast episode lined up for you today.

(Text on-screen: Joelle Hamilton, Communications & Marketing, CMHC)

(Visual: The camera cuts to a two shot of Joelle and her guest sitting at a table equipped with microphones and laptop computers in a brightly lit room.)

0:00:23

JOELLE: In this episode, we’ll explore the findings from CMHC’s Fall 2024 Housing Supply Report and we’re going to look at the differences in housing starts in Canada’s major cities, the rise in new apartment construction and a construction boom that we’re seeing in one of Canada’s provinces.

(Visual: The camera cuts to a shot of Joelle.)

0:00:40

JOELLE: Joining us for the discussion, today, is Aled Ab Iorwerth, our Deputy Chief Economist. Welcome!

(Visual: The camera cuts to a shot of guest Aled.)

0:00:46

ALED AB IORWERTH: Thank you!

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:00:47

JOELLE: Thank you again for agreeing to be part of our podcast.

0:00:50

ALED: No problem.

0:00:51

JOELLE: I was thinking we could start off with you giving us a brief overview of the Housing Supply Report, such as what its objectives are. And then, we’ll get into some of the key findings.

(Visual: The camera cuts to a shot of Aled.)

0:01:01

ALED: Well, for a few years now, CMHC has been putting a lot of emphasis on and indeed, applying pressure to improve housing supply across Canada.

(Text on-screen: Aled Ab Iorwerth, Deputy Chief Economist, CMHC)

0:01:09

ALED: Of course, the central goal is to improve affordability, and the key way that we believe that this will be achieved is by increasing housing supply.

0:01:18

ALED: Affordability is a major challenge for almost everybody in Canada, across the country, and in order to address this really key problem, we need to increase housing supply.

0:01:29

ALED: So, we decided, through this report, to have a deeper dive on the housing supply situation across Canada. It concentrates on our large urban areas because that’s where the biggest affordability challenges lie.

0:01:44

ALED: So, it’s basically a summary, a report on what we’re seeing in housing supply in Canada’s large urban areas.

(Visual: The camera cuts to a shot of Joelle.)

0:01:52

JOELLE: And the fall edition of the Housing Supply Report focuses on looking at what happened during the first part – or the first half – of the year.

0:02:03

JOELLE: So, my big question is: Did housing starts decrease? Did they increase in the first half of 2024, compared to the same time in ’23?

(Visual: The camera cuts to a shot of Aled.)

0:02:12

ALED: They went up, actually, and this was good news because we were actually quite pessimistic. They went up by around 4%, compared to the first 6 months last year, which is really good news because what we were concerned about was the effect of interest rates.

0:02:27

ALED: When developers, investors take out money to build new housing supply, they mostly have to borrow this money. And so, the interest rate is a key factor.

0:02:37

ALED: So, we were fearful that housing supply, housing starts would fall as a result of the high interest rate. That has not yet materialized. We are still concerned about it.

0:02:47

ALED: So, it’s actually good news that housing starts… Maybe it sounds like a small number, 4%, but given the macroeconomic situation, I think it’s a very good result.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:02:57

JOELLE: OK. So, I read in the report that there were 68,639 new units that were started in the first half of 2024.

(Visual: The camera cuts to a shot of Joelle.)

0:03:07

How does this compare, historically?

(Visual: The camera cuts to a shot of Aled.)

0:03:10

ALED: Yes, and that’s the key question, historically, because we have to make a few adjustments to compare back in time.

0:03:18

ALED: Taken on its own, the number is very big, and it’s a large number relative to the absolute number of units started historically. Obviously, Canada’s population was considerably smaller back in time.

0:03:32

ALED: So, what we have to do, when we dig into the data, is adjust for Canada’s growing population size.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:03:40

ALED: And if you look at that metric, unfortunately, the housing supply is sort of on par with what’s happened historically and doesn’t really stand out.

(Visual: The camera cuts to a shot of Aled.)

0:03:48

ALED: So, the number is big, at the moment, but relative to the size of the population, it hasn’t changed that much over the last, say, decade.

(Visual: The camera cuts to a shot of Joelle.)

0:03:59

JOELLE: And so, if we look at Canada’s 6 biggest cities, there are regional differences. Housing starts were not the same in Toronto, Vancouver and Ottawa as they were in Montréal, Calgary and Edmonton.

0:04:14

JOELLE: Can you tell us what happened in Vancouver, Toronto and Ottawa?

(Visual: The camera cuts to a shot of Aled.)

0:04:19

ALED: What we think happened, and I’ve already alluded to it a little bit, is the effect of interest rates. And those seem to have created a challenge, shall we say, for developers, builders in Toronto, Ottawa, Vancouver, and Montréal. Particularly, probably, more rapidly in Montréal, because the housing starts last year were quite weak in Montréal.

0:04:42

ALED: In contrast, what seems to have happened in the Alberta cities is that you had strong economic growth for a variety of reasons… people are moving to Alberta…

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:04:52

ALED: …it’s relatively easy to get housing built in Alberta.

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0:05:06

ALED: And so, the housing system, construction, has responded fairly quickly in Alberta, and you’ve seen housing supply go up a lot in Calgary and Edmonton.

0:05:19

JOELLE: So, specifically talking about Calgary and Edmonton, I know that Calgary has something called the Downtown Incentive Program, where they are using vacant office space and converting those into rental apartments. And then, both cities have policies that encourage the development of secondary suites.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:05:40

JOELLE: Did this play a role in the boom that we’re seeing in Alberta construction?

0:05:44

ALED: Yes, and I think… I mean, they’ve been talking about this for a long time in Calgary. In Calgary, because of the effect of oil prices being lower about a decade ago, there were a lot of empty downtown office spaces there, even before COVID and the move towards working from home. So, this has been a longstanding challenge in Calgary.

(Visual: The camera cuts to a shot of Aled.)

0:06:05

ALED: But what they’re now succeeding at doing is converting that empty office space into housing, and this is contributing to housing supply in Calgary, and probably is a way for them to accommodate the growth that they’re experiencing as people move to Alberta from the rest of Canada.

0:06:22

ALED: So, this is probably an experience that the rest of Canada, other Canadian cities, need to take a look at.

(Visual: The camera cuts to a shot of Joelle.)

0:06:30

JOELLE: We’ve seen new apartment construction going up and then a decrease in new condo construction.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:06:37

JOELLE: What are the reasons behind these differing trends? And what impact do they have on the overall housing market?

0:06:45

ALED: Right, and this is one of the key changes that we are now seeing. What seems to have happened is, again, the effect of interest rates on small individual investors.

0:06:57

ALED: These individual investors are really important in getting money to finance and build apartment buildings, condominium apartment buildings.

(Visual: The camera cuts to a shot of Aled.)

0:07:06

ALED: So, a lot of those apartment units are rented out by individual investors, in what is technically called the “secondary rental market.”

0:07:15

ALED: And this secondary rental market has become very important, particularly in Toronto and Vancouver, because it’s so difficult to get a purpose-built rental built in these cities.

0:07:27

ALED: So, to repeat, what has happened is that interest rates have really deterred small investors from providing financing for the construction of condominium apartments, and what we’re seeing across these urban areas is a really sharp decline in starts of these tall condominium buildings.

0:07:49

ALED: So, that’s one aspect that we’re a bit concerned about, because this is such an important source of rental units in very expensive cities.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:07:58

ALED: On the other hand, we are seeing a lot of purpose-built rental units getting built, and that sector is actually holding in there.

0:08:07

ALED: We believe that a lot of government programs at the moment are supporting rental construction. For example, CMHC programs, the Apartment Construction Loan Program is supporting construction of these purpose-built rental units, and that’s holding in there.

(Visual: The camera cuts to a shot of Aled.)

0:08:22

ALED: So, the rate of construction of purpose-built rentals is going up, a trend that’s holding in there, and we hope that it continues.

0:08:31

ALED: We still are a little bit concerned about the lagged effect of interest rates on this construction but, at the moment, rental construction is holding in there.

0:08:41

ALED: Now, arguably, there should be even more being built, because the rate of construction of these types of buildings is quite low in Toronto, for example.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:08:50

JOELLE: How crucial is the role of private investment?

(Visual: The camera cuts to a shot of Aled.)

0:08:54

ALED: Explaining the rental sector is extremely important for Canadians. Roughly a third of Canadians rent, but it’s particularly important in our very expensive cities.

0:09:06

ALED: People can’t buy condominiums. It’s just… It’s too expensive. So, ensuring that there is a vibrant rental sector is absolutely critical.

0:09:17

ALED: And the rental sector is provided by purpose-built rental housing on the one hand, and the secondary rental market on the other hand, made up of small investors.

0:09:27

ALED: So, clearly, a lot of private money is necessary in order to finance construction of new rental supply.

0:09:35

ALED: So, this again emphasizes that we need private money to go into rental construction. Very roughly, in Canada, the private sector delivers about 96% of housing.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:09:46

ALED: So, clearly, private money is essential to get housing built, and that is particularly true in the rental sector, in getting these large purpose-built rental structures built.

(Visual: The camera cuts to a shot of Joelle.)

0:09:59

JOELLE: And you mentioned the government programs that are in place to help increase housing supply, and I’m thinking specifically of one that was recently in the news, where the Government of Canada mentioned that they were going to be leasing 56 government-owned properties to builders who will convert those into affordable rentals.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:10:21

JOELLE: Do you think that’s going to help?

0:10:23

ALED: I think everything is going to help. We need, across the board, policies of all types. We need the private sector involved, as I mentioned earlier. We need the government sector, and all orders of government: We need the municipalities to hand over land, we need the federal government to hand over land.

(Visual: The camera cuts to a shot of Aled.)

0:10:40

ALED: Governments have a lot of underutilized land, underutilized buildings and city centres. These must be ripe for redevelopment and they’re part of getting more housing supply.

(Visual: The camera cuts to a shot of Joelle.)

0:10:52

JOELLE: What challenges and opportunities lie ahead for housing supply in Canada?

(Visual: The camera cuts to a shot of Aled.)

0:10:59

ALED: Well, I think we’ve managed to change the debate toward the importance of more housing supply. So, I think there’s now a recognition and even policy changes that are encouraging housing supply.

0:11:11

ALED: But I think there’s a lot of devil in the details, and actually getting more housing supply built is still a very challenging process. We released a report on government regulation last year, and there’s an enormous amount of red tape, particularly in some of our more expensive cities.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:11:28

ALED: But it’s not just an issue of regulation. I think there are a lot of fees and taxes on new construction, and these add significant amounts to the cost of building. So, I think there needs to be a look at these costs as well.

(Visual: The camera cuts to a shot of Aled.)

0:11:43

ALED: So, there are a lot of challenges in terms of building new housing, but there are clearly opportunities there as well. There’s a lot of demand for housing, for all types of housing: rental, ownership, different types of ownership. So, there must be huge opportunities for developing new housing, new types of housing, all across the country.

(Visual: The camera cuts to a shot of Joelle.)

0:12:04

JOELLE: So, I hear you’re working on a new piece that will be coming out early this fall. Can you give us a glimpse into what you’ve been working on?

(Visual: The camera cuts to a shot of Aled.)

0:12:13

ALED: Well, this is part of a larger body of work that we’re developing to try and understand some of the drivers of housing supply, housing demand and affordability. And what we are really digging into in this particular piece is the impact of interest rates, which I’ve been sort of hinting at throughout the conversation.

0:12:31

ALED: So, the importance of interest rates and, frankly, the impact of that on the massive amounts of private investment that we need in housing construction.

(Visual: The camera cuts to a two shot of Joelle and Aled.)

0:12:40

JOELLE: Thank you so much for providing us with these valuable insights and for walking us through the latest CMHC Housing Supply Report.

0:12:49

JOELLE: That’s a wrap for our podcast today, but I’m very much looking forward to you coming back next spring and talking about the spring edition.

0:12:58

ALED: Thank you!

(Visual: The camera cuts to a shot of Joelle.)

0:12:59

JOELLE: And thank you to you, our listeners, for tuning in. We’ve covered a lot of ground on CMHC’s latest Housing Supply Report, and if you’re interested in reading the full report, it’s available on CMHC’s website and the link is also available in the description below. Until next time!

(Visual: The screen fades to an outro featuring an animated background composed of various shapes of houses and doors.)

0:13:17

NARRATOR: You’ve been listening to CMHC’s “In-House,” where we talk about what matters in housing.

(Text on-screen: In-House, Canada’s Housing Podcast)

0:13:23

NARRATOR: Don’t miss our next episodes for more real, data-driven discussions.

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0:13:28

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0:13:35

NARRATOR: Reach out! Let us know what you think!

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0:13:37

NARRATOR: Thanks for listening and see you next time.

(Visual: Animated logo of CMHC and the Canada Wordmark)