Far more investment will be required to finance housing ambitions
Boosting Canadian housing affordability and business investment are critical to growth and prosperity, but are Ottawa’s ambitions achievable?
Fraser Institute senior fellow Steven Globerman says that the government will need to attract far more investment to provide the platform for its plans, including $300 billion in additional financing annually from 2025 to 2030 to meet its new homes construction targets.
"To increase home building and restore business investment in key areas like technology to previous levels, Canada needs to become much more attractive to investors, both from within Canada and around the world," said Globerman, author of Canada Needs to Save Much More to Finance an Ambitious Investment Agenda.
CMHC says that Canada needs to build approximately 3.5 million additional new homes by 2030 to restore housing affordability, but Globerman says this will require an estimated $331 to $364 billion in additional financing.
Meanwhile, to ignite business investment in communications/IT and other areas – just to restore it to previous levels – will require an additional $13 billion annually. The total requirement of up to $377 billion per year is equivalent to increasing the current Canadian savings rate by 50%.
"It is very likely that the ambitious targets that have been set for homebuilding and business investment won't be met, but even so, encouraging increased investment and higher domestic savings is a worthy policy pursuit," Globerman said.
The report suggests that attracting more foreign investment would be one way to mitigate a drastic increase in the domestic savings rate, but this would require substantial policy reforms to make Canada a more attractive environment for foreign investors.
