Canada's Housing Crisis: Carney Budget Falls Short on Market Reforms

Prime Minister Mark Carney's federal budget reveals a concerning disconnect between Canada's housing crisis reality and proposed solutions. While the government tackles immigration demand, critical supply-side reforms remain largely unaddressed.

The Scale of Canada's Housing Challenge

Canada faces a staggering shortage of approximately 2.6 million housing units, according to the Canada Mortgage and Housing Corporation (CMHC). This deficit has driven inflation-adjusted home prices to double since the early 2000s, creating an affordability crisis that demands comprehensive reform.

The government has implemented meaningful demand-side measures, reducing permanent immigration targets by over 20 percent and cutting temporary immigration by 25-32 percent. These adjustments have already begun easing rental market pressures nationwide.

Supply-Side Solutions: Where Reform Falls Short

The budget's centerpiece, Build Canada Homes, allocates $7.28 billion over five years for affordable housing construction. However, this represents only half the Liberal's original election commitment of $2.9 billion annually. The program aims to deliver 45,000 units, including 4,000 factory-built homes.

Performance concerns emerge from historical data: The Rapid Housing Initiative promised 12,000 affordable units for $3.84 billion but has completed only 8,981 units since 2020. At $240,000 per unit, these programs deliver minimal market impact while consuming substantial resources.

Missing Market Reforms

The budget's most significant shortcoming lies in addressing regulatory barriers that constrain private market construction. Municipal development charges, which have exploded from thousands to $81,000 per unit in Toronto, represent a critical affordability barrier.

While the Liberals previously promised to pressure municipalities into halving these charges with $1.5 billion in compensation, the budget reduces this commitment to $1.2 billion with vague language about "substantial reductions."

Zoning Reform: The Elephant in the Room

Perhaps most concerning is the budget's silence on zoning reform. Municipal governments continue reserving vast residential areas exclusively for single-family homes, legally preventing density increases that could boost supply.

Despite federal infrastructure funding leverage through the Housing Accelerator Fund, enforcement remains weak. Toronto increased development charges by 40 percent in 2024 without federal penalties, undermining reform credibility.

Expert Assessment and Market Impact

Housing economists express significant disappointment. Mike Moffatt of the Missing Middle Initiative describes the budget as worse than "disappointing," while Eric Lombardi of More Neighbours Toronto suggests federal policy signals "middle class homeownership is dead."

The proposed GST cut for first-time buyers, while politically popular, may simply fuel bidding wars without addressing underlying supply constraints.

A Path Forward

Effective housing policy requires bold regulatory reform targeting municipal barriers to construction. Canada's housing crisis demands market-oriented solutions that unleash private sector capacity while maintaining strategic public investment in affordable housing.

The current approach, focused primarily on government-built units, cannot scale to meet Canada's 2.6 million unit deficit. Only comprehensive zoning reform, development charge reductions, and streamlined approval processes can deliver the housing supply Canadians desperately need.