Bridging the Supply Gap and Restoring Affordability

Residents of the Fraser Valley area know better than most that housing affordability is no longer just a Vancouver problem. Canada Mortgage and Housing Corporation (CMHC) recently updated estimates and analysis of housing-supply gaps in Canada. We estimate that housing starts must nearly double to around 430,000 to 480,000 units per year until 2035 to meet projected demand.

That would bring us back to the levels of affordability we saw in 2019 – the year before the pandemic fundamentally changed the housing landscape. Since then, the affordability challenge has spread across the country, beyond the borders of Vancouver and Toronto, our two largest cities.

That’s not to say the situation in Vancouver is no longer exceptional. But it’s exceptional for a different reason: Now, Central Vancouver is different from the rest of BC (and everywhere else except Toronto) because the affordability problem is structural there. It’s been entrenched for a long time and will take more time to address. Whereas in the Fraser Valley, the rest of British Columbia, and indeed the rest of Canada, we can make a big impact on affordability by getting more housing built, sooner.

The bottom line of our analysis is that the problem is a systemic lack of supply. Unfortunately, there are barriers that prevent Canada from boosting that supply to the level we need – factors like insufficient private investment, a productivity shortfall in the residential construction sector, and an excess of regulatory delays. But if we as a country can pull down these barriers, we can start bridging the supply gap and return to a more affordable housing system.

Shifting the focus towards housing supply

Once upon a time, focusing on supply flew in face of conventional thinking—10 years ago the prevailing idea was that foreign speculative investment was the problem. It was in this context that CMHC released its first supply-gaps estimate, in 2022, to redirect attention to where it belongs. Putting a number to the supply gap was intended as a wake-up call rather than a specific target. It supported our position that the issue behind rapidly rising home prices was a severe shortage of all types of housing, everywhere across Canada.

We’ve refined that work in our new report, which we released earlier this summer. Using new, enhanced methodology developed in-house, and the new estimates are now based on a rolling 10-year horizon, meaning that we’re currently looking at 2035. By then, Canada’s total stock needs to grow by nearly six million homes to return the country to 2019 affordability levels, which is the other most notable change in our new supply-gaps estimate. Previous estimates referenced affordability levels seen in 2003-04.

However, Canada’s housing markets have undergone significant change since 2020. Much of it had to do with changes in how we work. As the use of work-from-home technologies spread, people started looking at homes further from major centres and into suburbs and other less expensive regions (such as further into the Fraser Valley). The result, of course, has been that those communities became more expensive. That’s why it makes sense to aim to regain the levels of housing affordability we had pre-pandemic.
We’ve made other adjustments to our modelling such as including household formation, mobility, and regional affordability dynamics, all in pursuit of a clearer, more accurate picture of Canada’s housing needs. With a better understanding of the gap, we get a better idea of how to bridge it.

More supply–of all types–needed across the Fraser Valley

Zooming in on the Fraser Valley, its fastest-growing community, Surrey, projects it will need over 53,000 new housing units by 2028, even as approximately 21,000 units were completed between 2020 and 2024. Although Surrey consistently delivers one of the highest volumes of new housing in the Fraser Valley and the region, the current rate of development clearly needs to increase.

Demand continues to rise across both ownership and rental markets, with a particular demand for affordable multi-family housing, and for compact units that cater to singles, couples, and individuals seeking independent living. Expanding the diversity and accessibility of housing options will be key to supporting the region’s evolving population.

Housing dynamics in the Fraser Valley are undergoing a noticeable shift. Traditional patterns of ownership are gradually giving way to a growing reliance on rental housing, shaped by evolving demographics and persistent affordability challenges.

In Surrey, much of the rental supply continues to come from the secondary market, including basement suites and investor-owned condominiums, which reflects people adapting to housing pressures. While there has been steady growth in purpose-built rental developments, the overall landscape still leans heavily on informal rental arrangements, underscoring the need for more stable and accessible rental options.

Shared living in larger homes is also becoming more common. The creation of these multi-renter households—made up of extended families or even unrelated individuals—are a response to high housing costs and limited affordable options. If more people had access to suitable independent options, overall demand would rise significantly, revealing an even deeper need than current estimates suggest.

Surrey and Langley’s expanding transit network is reshaping how and where housing is being built in the Fraser Valley. The SkyTrain extension, rapid bus services, and updated zoning policies are encouraging more compact, transit-oriented development in well-connected areas. These initiatives are not just about improving mobility, but they are central to housing strategy, supporting a mix of housing types and helping preserve existing rental stock. As transit access improves, communities along these corridors are becoming increasingly attractive to families and residents seeking more affordable alternatives to central Metro Vancouver.

Policy Responses to Help Remove Key Barriers

With new provincial policies reducing upfront development costs and streamlining financing, BC is supporting a more responsive environment for housing projects. These changes are helping developers move forward with greater confidence, particularly in regions like the Fraser Valley where the need for diverse and affordable housing continues to grow. By lowering financial barriers and improving predictability, the province is supporting faster delivery of a broader range of housing options.

The federal government has supported BC in some of these endeavours. It is also now working directly with municipal governments via the Housing Accelerator Fund, which CMHC delivers. The fund is encouraging communities to end restrictive zoning rules, streamline approvals, cut red tape and modernize bylaws.

As mentioned earlier, streamlining housing regulations will be crucial to closing the housing gap. CMHC’s 2022 municipal land and regulation survey, conducted in association with Statistics Canada, found that higher residential land-use regulation was associated with lower housing affordability. Unsurprisingly, the survey found Vancouver to be especially restrictive. CMHC will release additional research to support this finding later this year.

Productivity Gap

But the solution doesn’t rest only with governments, which cannot be expected to fill Canada’s housing shortages alone. The residential construction industry needs to innovate and boost productivity. Along with the housing-supply gap, CMHC’s researchers have identified a productivity gap in Canada: a gulf between what we are building, and what we could be building based on the resources currently being devoted to housing. We could be building around 400,000 new homes each year based on the amount of labour and capital being devoted to residential construction.

Construction companies can unlock some of that capacity through innovation. Canada has been building homes the same way for decades, even though there are new technologies and approaches available that our peer countries are already putting to good use. Canada’s builders can look to countries like Sweden, a world leader in prefabricated building (which also happens to have a similar climate) and learn from their experiences.

Of course, it won’t happen without investment. We need to invest more in housing.

That includes investing in social housing. The market will never meet all of our housing needs. But the vast majority of housing in Canada is provided by the private sector, and that will remain true as we work to fill the supply gap. Governments at all levels need to work together, and with the private sector, to create the circumstances to attract that investment. That means, as mentioned, streamlining regulations. It also means creating a policy framework that encourages long-term investment, while at the same time ensuring adequate protection for tenants

Our modelling research regarding Canada’s housing supply has underscored the urgency and the scale of the challenge we face in returning to affordability. But we can get there. With collaboration between the private sector, not-for-profit sector and government; with policy and construction innovation; and with long-term commitment across the board, we can bridge the supply gap and make housing affordable in Canada.