The federal government has set ambitious goals – but banking giant says fewer homes may be needed
Canada’s target of delivering half a million new housing units annually may not be required to restore affordability – but current policy measures are unlikely to close the gap from the nation’s average of approximately 210,000 completions per year, according to a new report by TD Economics.
While the federal government under prime minister Mark Carney has positioned the 500,000 figure as a central target over the next decade, TD’s modelling suggests that a 400,000-unit benchmark may be sufficient to bring affordability back to pre-pandemic levels, assuming the country avoids a major economic downturn.
Labor constraints and productivity pressures
Achieving even the revised 400,000 target would require overcoming substantial labour and productivity challenges. At today’s productivity rates, hitting this level would mean growing Canada’s residential construction workforce by 16% annually, a rate considered untenable given the projected retirement of thousands of workers and existing competition for skilled labour. The construction sector is expected to face a shortage of 108,000 workers by 2034.
More moderate assumptions indicate that a 1% yearly increase in the construction labour force—below the recent 10-year average—would still require a 50% gain in productivity to meet the 400,000-unit goal within 10 years. This scenario highlights the pivotal role of the government’s proposed “Build Canada Homes” (BCH) entity.
The government’s scaled solution
BCH is tasked with transforming the construction process by scaling up Canada’s prefabricated housing sector. The plan includes nearly $40 billion in financing aimed at expanding modular construction, which currently accounts for just 4–6% of housing starts. Prefabricated methods could cut building timelines by 50% and reduce costs by 20%, according to research cited in the report.
However, scaling prefab construction presents its own challenges, including fragmented municipal design codes and the need for consistent demand. The federal government’s commitment to bulk purchasing from manufacturers is seen as a step toward stabilizing the sector, but success will depend on long-term follow-through and coordination with local jurisdictions.
