It’s no secret that Canada is facing a housing crisis. The country is in need of programs and strategies to help build more homes that meet people where they are. It’s a national issue that requires collaboration from all leaders, politically and otherwise.

The Honourable Sean Fraser, Minister of Housing, Infrastructure and Communities, is our guest on this episode of REAL TIME, where we discuss Canada’s housing supply goals, where we can draw inspiration from, and how REALTORS® can be part of solutions.

Transcript

Erin Davis: Canada is in a housing crisis. The country is in need of programs and actions to help build more homes that meet people where they are. It's a national issue that requires collaboration from all leaders, politically and otherwise, to help ensure everyone has a home.

Hi, I'm Erin Davis, and this is REAL TIME, the podcast for REALTORS®, brought to you by the Canadian Real Estate Association. Today, we are joined by the Honorable Sean Fraser, Minister of Housing, Infrastructure and Communities, to talk about Canada's housing supply goals, the challenges we are facing to make them a reality, and how REALTORS® can be part of the solution. Minister Fraser, thank you for being here today.

Minister Sean Fraser: Thanks so much for the opportunity to connect. Looking forward to it.

Erin: The natural place to start is the state of the housing crisis in Canada. 5.8 million homes are needed to be built by 2030 to help restore affordability and address supply. What is currently in place to help with the development and affordability of housing in Canada, both now and in the shorter term?

Minister Fraser: Look, thanks very much for the question. Depending on who you ask, you're going to get a range of different estimates on exactly what it's going to take to cure the supply gap. The one thing I think everybody agrees on is we need to build more homes. The housing plan that we've put out just in April of this year seeks to do that in three keyways. The first is to reduce the cost of building homes. The second is to make it easier to build homes. The third is to adopt new strategies when it comes to the way that we actually build them. Let's dig in a little bit on what that means.

To reduce the cost, what we've tried to do is look in our own backyard to figure out what we can do as a federal government to directly reduce the cost of housing.

We have removed the GST from new apartment construction and changed capital cost allowances to reduce taxes on home builders, and we're starting to see that have an impact.

We also create low-cost financing programs, such as the Apartment Construction Loan Program, or something new that's coming up to build accessory dwelling units to get more supply into the market, which is particularly helpful during a high-interest rate environment.

We've got a big project on the go that we'll have more to say about, I think, in this conversation, including the use of public lands to build more homes.

In addition, we need to incentivize solutions at other levels of government, including zoning and permitting reforms, and, of course, embracing new technologies when it comes to building houses more quickly, such as factory-built homes. There's no silver bullet. If it were easy to solve, smarter people than me would have decades before. The reality is there's a number of levers at our disposal that can help build out that supply, which is essential if we're going to cure the supply gap and ultimately resolve a reasonable level of affordability in the housing market in Canada.

Erin: The existing programs are certainly a great step forward, but we also need to acknowledge that the reality is hitting those housing supply goals is a difficult task. We've heard some rhetoric around development cost charges. Minister, can you fill us in on how or if those are affecting our ability to not only build homes, but build affordable homes?

Minister Fraser: Certainly. I've got a particular perspective on development cost charges. For those who may not be familiar with the issue, it's a tool that municipalities use to raise revenue. In my view, it's one that does so fairly inefficiently because it raises all the revenue on new housing. When you increase the cost of something, you tend to get less of it or you get some of it with a higher price point.

From my perspective, it risks both impacting the housing output goals that we've set as a government and the housing affordability goals, because developers, despite the fact I believe most of them are in it for the right reasons, want to help provide solutions, they're also running businesses. We can't expect that businesses who incur larger costs simply to eat all of those costs. Now, to a degree, community versus community, it may happen in some and not in others. What we're trying to do is to understand, why are municipalities feeling the need to increase development cost charges? I don't believe it's because any community wants to increase the cost of housing. It's because municipalities are cash-strapped. We need to deal with the very real challenges that cities are facing in this country when it comes to now dealing with the costs of certain services that traditionally may have fallen within, particularly at the provincial level of government, including community housing, including dealing with homelessness in their communities.

When you have municipalities incur these increased costs and they have limited access to revenue tools, they go in the areas where they think they have some political space to play.

The solution is going to be to increasing, from other orders of government, the level of investment in infrastructure that currently development cost charges are being used to build out. We've put $6 billion on the table for housing-enabling infrastructure. In order to access it, we said, "You have to freeze your development cost charges."

For those who don't wish to abide by those terms, we have created a new product through the Canada Infrastructure Bank that will provide lower-cost financing to build out that infrastructure, but we want to ensure that if you're going to be using federal dollars to build out municipal infrastructure, you're not simultaneously increasing the cost to housing in your community.

Development cost charges are one of the hurdles we need to overcome. We're seeking to do that by tying access to federal infrastructure money to policies around freezing the cost of development cost charges when that policy was released in April of this year.

Erin: What are some of the frustrations that you're feeling in regards to hitting the housing supply target?

Minister Fraser: There's no shortage of things to become frustrated about, but I try to focus on the opportunities that we have to make a difference. That said, there are certain potential obstacles that we're going to need to overcome, that the impact of our policies remains to be seen. Now we're starting to see very good output when it comes to building permits, for example. We have seen some encouraging numbers when it comes to the latest data from CMHC on housing starts in the month of May of this year. If I look forward two, three years, and I ask myself what bottlenecks are we potentially going to hit if we can't resolve them today, the productive capacity of the Canadian economy is one of the very serious obstacles I think we're going to need to overcome.

We're producing homes close to the record level of production, but when I talk to builders in different markets in Canada, some are already experiencing a labor shortage that's preventing them from growing their home-building capacity. We also see an opportunity to overcome this not just by training the next generation of Canadian workers, but by incentivizing new construction methodologies that pull from a different labor pool, specifically modular housing, penalization, mass timber, potentially even 3D printing, that don't necessarily rely on the same pool of skilled tradespeople that traditional home builders may. By bringing in new solutions, we can overcome that obstacle.

The other piece that is a big question mark is the involvement of other levels of government. I think the federal government can say sincerely, "We've put our hand up and want to play a leadership role, but we need others to join the fight."

Province to province, the ambition and appetite for change varies significantly. We can't do this alone. We'll need provincial governments and municipalities pulling in the same direction.

The third and final, potentially the most important bottleneck, is capital. Making sure we're creating an opportunity for money to come into the housing sector by creating a set of circumstances that makes it more appealing to invest in Canadian home building than it does for investors who may be targeting industries in different parts of the world.

Crowding in that private capital, working with provinces, and growing the productive capacity of the Canadian home-building workforce are the three big things that I believe will pose a bottleneck if we don't sort out the policy solutions today that will reveal themselves over the next few years.

Erin: Minister, you used the term "legalize housing" last fall and it left some people curious. What did you mean by legalize housing?

Minister Fras