Housing affordability may be the biggest issue facing Canadians today. A poll from Abacus Data found that 64 per cent of people believe that homeownership comes with risk and financial strain, while 81 per cent say the dream of owning a home is slipping away.
As many politicians, business leaders and average Canadians have discussed for years, the problem is supply and demand. There are more people looking for homes than units available on the market. Eliminating that gap would require building 1.3 million more units than have already been planned by 2030, according to a recent report from the Parliamentary Budget Office.
It may also require a slowdown in population growth, which has been a big reason for the increase in demand. Between January 2023 and 2024, Canada’s population increased by more than 1.2 million people for an annual population growth rate of 3.2 per cent, the highest increase since 1957.
“Canada hasn’t been building enough, while the population continues to rise,” says Alan Dillabough, the vice-president of development at Equiton, a Canadian private real estate investment firm. “Housing prices have outstripped inflation in pretty much every market in Canada [fairly] significantly over the last 20 years.”
Of course, simply building more is easier said than done. Canada is facing a construction trades shortage, government approval processes are slowest in the urban centres – the areas most in need of new housing – and inflation has increased costs.
However, there appears to be an appetite for change. The 2024 federal budget outlines a housing plan to build nearly 3.9 million net new homes by 2031. Private real estate firms will play an important part in those builds — and in addressing the supply and demand imbalance more generally.
“More supply can help push affordability in the right direction, but pace is a major factor when you’re looking at this much population growth and demand,” says Dillabough, adding that the private sector is responsible for almost all new housing construction in Canada. “Real estate developers are experts in creating supply.”
Reigniting real estate
Equiton was founded in 2015 with the mission of making private real estate investing more accessible to Canadians. It manages 47 properties in 18 communities across Canada.
In 2021, the company added a development division to build multi-residential units in cities that desperately need them. By bringing development in-house, says Dillabough, Equiton can better control costs and project timelines, while navigating the municipal approval process itself. The cost efficiency of going in-house also helps maximize the margin for investors.
Dillabough believes that private real estate firms, working alongside government, are best positioned to stimulate new investment in the real estate sector.
“Today, we have this very sophisticated, experienced, and well-capitalized private development sector that’s responsible for almost all the new housing you see in Canada. With the right policies in place, we can continue to effectively create the new market housing Canadians need,” he says.
Equiton offers investors a number of options for getting involved in development. They have the opportunity to buy directly into a specific development project — like the company’s newly acquired TEN99 Broadview development, which is open for funding — and are paid out upon completion. Equiton’s Real Estate Income and Development Fund, on the other hand, allows individuals to participate in a portfolio of condo developments to earn special distributions when projects are completed.
Faster approval times needed
Private real estate companies are eager to build. Equiton, which focuses on mid-rise projects that take, on average, five to seven years to complete versus lengthier times for high rise buildings, is already bringing new housing online, rewarding investors on a reasonable timeline. However, with Canada having the lengthiest housing project approvals in the world, those timelines could be accelerated.
According to Dillabough, municipal approvals for an urban infill project can take between three to five years, in part because of the years-long approvals process. If projects could get green lit within 12 to 18 months, which is what Dillabough has seen in other real estate asset classes, firms like Equiton could complete a multi-residential condo within three years.
Governments are coming around, finding ways to incentivize multi-unit construction. For instance, in October 2022, Ontario passed the More Homes Built Faster Act, which eliminated HST from new purpose-built rental housing. A recent change to Ontario’s Planning Act, which lays out the ground rules for land use planning in the province, should help streamline approvals. In September, the provincial government also announced that it would build a new training centre for construction workers.
However, this is just a start. Governments can help even more by reducing development charges, which represent about 30 per cent of the cost of development, as well as opening up zoning to allow for greater density, which would make a real impact on the housing supply, says Dillabough.
While it will take time and private-sector collaboration to bring supply and demand in balance, there is optimism that the country can get closer to addressing this crisis. For instance, the Canada Mortgage and Housing Corporation, in its 2024 Housing Market Outlook says, “In 2025–2026, lower interest rates, milder construction cost growth and government support should make more projects viable. Homebuyers can also expect lower interest rates as real incomes and confidence levels improve.”
“Generally speaking, we share our investors’ bullish sentiment toward multi-residential housing in Canada,” adds Dillabough. “We think there’s been enough discussion in the marketplace that governments are going to start to move in the right direction in terms of streamlining the process. We like this space, which is why we launched Equiton Developments, which is backed by Equiton and our real estate experts. This will help us bring more housing to the market which will benefit Canadians.”