Fixing housing affordability could cost $1.7 trillion, economist says

Restoring housing affordability in Canada could require up to $1.7 trillion in additional investment over the next decade, according to a new analysis by economist Charles St-Arnaud.

The estimate is based on the roughly 4.8 million homes Canada Mortgage and Housing Corporation says must be built over 10 years to return affordability to more sustainable levels.

Assuming an all-in cost of between $500,000 and $750,000 per home, including construction, development charges and supporting infrastructure, St-Arnaud estimates the total investment needed at between $2.4 trillion and $3.6 trillion.

Many of those homes would be built under current projections. After accounting for approximately 2.5 million units expected to be completed anyway, the additional investment required would be about $1.2 trillion to $1.7 trillion.

“While our estimate of the cost of delivering new housing units is far from precise, it provides a ballpark of the size of the investment in new housing supply that will be required over the next decade,” St-Arnaud wrote.

Canada invested approximately $116 billion in new residential construction in 2025. Maintaining that pace over 10 years would generate about $1.2 trillion in investment, meaning annual spending would need to rise to roughly two to three times its 2025 level.

St-Arnaud said lower development charges, greater use of factory-built housing and improvements in construction technology could reduce the cost of delivering the required homes.

More competition for capital

The report also considers the housing investment alongside Canada’s other spending priorities, including infrastructure, defence and efforts to improve productivity.

Housing construction and business investment would draw from the same pool of domestic and foreign savings. With governments and corporations expected to remain net borrowers, St-Arnaud said households and foreign investors would likely need to supply more of the required capital.

Canadian households have been net borrowers since the late 1990s, largely because of mortgage debt and residential investment. Moving closer to becoming net savers would require households to reduce borrowing, repay debt and increase savings while many continue to face affordability pressures.

Foreign investment would therefore have to play a larger role, according to the report. Attracting that capital would require Canada to offer competitive returns, greater certainty that projects will be completed and lower investment risks.

“Attracting the large amount of capital required will likely necessitate higher interest rates or returns, whether to incentivize domestic savings or to attract foreign capital,” St-Arnaud wrote.

Higher financing costs could make some housing and infrastructure projects uneconomical, reducing the amount of investment that ultimately takes place.

St-Arnaud said governments could encourage pension funds, asset managers and households to direct more savings toward Canadian projects. He also suggested financial regulations could be adjusted to support more business lending and reduce the economy’s reliance on household borrowing.

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