Thank you, Mr. Chairman and honourable members of the standing committee. My name is Stephen Moranis. I'm a former president of the Toronto real estate board and a former director of the Canadian Real Estate Association. I am here today with Dr. Murtaza Haider, a professor of real estate management at Ryerson University.
Together we write a weekly column for Postmedia, which is available as the Haider-Moranis Bulletin. The column appears weekly in the National Post and occasionally in newspapers across Canada, including the Ottawa Citizen. We are grateful for the opportunity to share our analysis and insights about the determinants of the rapid increase in housing prices since 2000 in Canada.
Housing prices have grown even more rapidly during the pandemic. The average housing price in Canada increased from $164,000 in 2000 to $502,000 in 2019. According to the data compiled by the Canadian Real Estate Association, the average housing price reached $567,000 in 2020 and $688,000 in 2021. While several factors have contributed to the rapid escalation of housing prices in Canada, including ultralow mortgage rates, we believe that the primary cause of the rapid house price escalation is the imbalance between demand and supply. In particular, the construction of new housing in Canada has not kept pace with the increase in the demand for housing.
The gap between the supply and demand for housing has not emerged overnight. We have traced data back to the early 1970s and found that the rate of construction, normalized by population, has declined considerably over the past five decades. To put things in perspective, in the early seventies, Canada was constructing over 10,000 new homes per million population each year. The rate of housing construction declined over the decades to nearly half—about 5,000 to 6,000 new homes built per million population in the past few years.
A temporary increase in housing starts might give a false impression that the housing supply is catching up. However, the housing deficit has accumulated over several decades, and a few thousand additional homes constructed in one year are certainly not sufficient to address the gap accumulated over decades. A recent research brief published by a major Canadian bank revealed that, if Canada were to have the same housing stock ratio relative to its population as is the average for G7 countries, Canada would require an additional 1,800,000 dwellings today. We estimated that if Canada had continued to build housing at the same rate as in the early seventies, over four million additional homes would have been built.
The predictable increase in housing demand, which is supported by a steady and predictable increase in population, requires a significant increase in the rate of housing construction to meet the housing needs of the growing population and address the housing deficit accumulated over the past few decades. Even in places, especially some large urban areas, where housing construction has strived to keep pace with the additional housing demand, the type of housing being built is essentially condominiums or small-sized dwellings that are not ideally suited to house growing families.
We would like to use this opportunity to highlight the need to accelerate the supply of new housing in Canada at rates far above the rates observed in the recent past. We recommend streamlining land development approval processes to consolidate decision-making under one roof, where all relevant stakeholders from local, provincial and national governments are represented, to reduce the approval processes that can take several years in some instances.
A national housing policy that brings together stakeholders from all tiers of government to increase the supply of housing, paired with an increase in combined-level government spending on affordable housing, financial guarantees and targeted support in regions of especially high demand, is a must to improve housing outcomes for all Canadians.
The construction of purpose-built rental housing took a nosedive in the early seventies when capital gains tax was first introduced. There is a need to reconsider the taxation regime, which might have served as a disincentive to constructing the purpose-built rental housing that is essential for the security of tenure and affordable rents of almost 30% of Canadians who live in rental housing.
We have submitted to the standing committee our report on the housing challenges published recently by the Macdonald-Laurier Institute. Again, we thank you for the opportunity and are available to answer any questions that you may have.
Thank you very much.