Fraser Institute
Carney government’s housing plan poses major risks to taxpayers
From the Fraser Institute
By Jake Fuss and Austin Thompson
A trade war, Trump’s threats to Canada’s sovereignty, and global economic volatility loomed large in the recent federal election. Yet many voters remained focused on an issue much closer to home: housing affordability.
In 2023, under Justin Trudeau, Canada added a record high 1.2 million new residents—more than double the previous record in 2019—and another 951,000 new residents last year. All told, Canada’s population has grown by about 3 million people since 2022—roughly matching the total population increase during the entire decade of the 1990s. Not surprisingly, homebuilding has failed to keep pace. In fact, housing construction rates have barely exceeded 1970s levels, even though the population has more than tripled since then. The result—a historic surge in housing costs.
On the campaign trail, the Liberals set an immigration target of about 400,000 per year, which is lower than the recent record highs but still high by historical standards, and tabled a plan they claim will double Canada’s residential construction rate to 500,000 new homes per year within a decade. But is it a good plan? And can the Liberals deliver it?
First, the good news. To help boost private homebuilding, the Carney government promised to introduce tax incentives including a rental building allowance, which would help reduce the tax bill on new multi-unit rental buildings, and a GST exemption for some first-time homebuyers, which may reduce the cost of newly-built homes and spur more homebuilding. The government also plans to expand the “Housing Accelerator Fund,” which offers federal dollars to municipalities in exchange for more flexible municipal building rules, and modernize the federal building code, which could shorten construction timelines. While much will depend on execution, these policies rightly aim to make it faster, cheaper and more attractive for the private sector to build homes.
Now, the bad news. The Carney government plans to create a new federal entity called Build Canada Homes (BCH) to “get the government back in the business of building.” According to Carney’s vision, the BCH will act “as a developer to build affordable housing” and provide more than “$25 billion in financing” to homebuilders and “$10 billion in low-cost financing and capital” for homebuilders to build “affordable” homes.
We’ve seen a similar movie before. In 2017, the Trudeau government created the Canada Infrastructure Bank (CIB) to invest in the “next generation of infrastructure Canadians need.” Since then, the CIB has approved approximately $13.2 billion in investments across 76 projects (as of July 2024), yet only two CIB-funded projects had been completed, prompting the authors of a multi-party House of Commons committee report to recommend abolishing the CIB.
The bureaucrats who will run the BCH won’t have the private sector’s expertise in housing development, nor the same incentives to keep costs down. BCH’s mandate is already muddled by competing goals—it must deliver “affordable” homes while simultaneously prioritizing certain building materials (e.g. Canadian softwood lumber), which could increase building costs.
The plan for BCH’s multi-billion-dollar loan portfolio includes significant “low cost” (that is, taxpayer subsidized) financing, a huge bet on prefabricated homebuilding, and no certainty about who will be on the hook for any failed projects—combined, this represents a major increase in costs and risks for taxpayers at a time when they already shoulder rising federal deficits and debt.
There’s also a real risk that BCH will simply divert limited investment dollars and construction resources away from private homebuilding—where projects respond to the needs of Canadian homebuyers and renters—and toward government-backed housing projects shaped by political goals. Instead of boosting overall homebuilding, BCH may simply reshuffle limited resources. And, as noted by the government, there’s a severe shortage of skilled construction labour in Canada.
It’s hard to see how Carney’s housing plan would double the pace of homebuilding in Canada—a very ambitious target that would require not only prudent housing policies but greater domestic savings, an implausibly large expansion in the construction workforce (which grew by only 18.4 per cent over the last decade), and the political fortitude to endure vocal opposition to housing development in certain neighbourhoods and on public lands.
Canada’s housing crisis will benefit from federal leadership—but not federal overreach. Rather than overpromising what it can’t deliver, the Carney government should refocus on what it’s best positioned to do: reform incentives, streamline regulations, and nudge municipalities and provinces to remove constraints on homebuilding. Trying to also act as a housing developer and lender is a far riskier approach.
Jake Fuss
Director, Fiscal Studies, Fraser Institute
Austin Thompson
Senior Policy Analyst, Fraser Institute
From the Fraser Institute
Based on the recent throne speech (delivered by a King, no less) and subsequent periodic statements from Prime Minister Carney, the new federal government seems stuck in an ambiguous and ill-defined state of energy policy, leaving much open to question.
After meeting with the premiers earlier this month, the prime minister talked about “decarbonized barrels” of oil, which didn’t clarify matters much. We also have a stated goal of making Canada the world’s “leading energy superpower” in both clean and conventional energy. If “conventional energy” includes oil and gas (although we’re not sure), this could represent a reversal of the Trudeau government’s plan to phase-out fossil fuel use in Canada over the next few decades. Of course, if it only refers to hydro and nuclear (also forms of conventional energy) it might not.
According to the throne speech, the Carney government will work “closely with provinces, territories, and Indigenous Peoples to identify and catalyse projects of national significance. Projects that will connect Canada, that will deepen Canada’s ties with the world, and that will create high-paying jobs for generations.” That could mean more oil and gas pipelines, but then again, it might not—it might only refer to power transmission infrastructure for wind and solar power. Again, the government hasn’t been specific.
The throne speech was a bit more specific on the topic of regulatory reform and the federal impact assessment process for energy projects. Per the speech, a new “Major Federal Project Office” will ensure the time needed to approve projects will be reduced from the currently statutory limit of five years to two. Also, the government will strike cooperation agreements with interested provinces and territories within six months to establish a review standard of “one project, one review.” All of this, of course, is to take place while “upholding Canada’s world-leading environmental standards and its constitutional obligations to Indigenous Peoples.” However, what types of projects are likely to be approved is not discussed. Could be oil and gas, could be only wind and solar.
Potentially good stuff, but ill-defined, and without reference to the hard roadblocks the Trudeau government erected over the last decade that might thwart this vision.
For example, in 2019 the Trudeau government enacted Bill C-48 (a.k.a. the “Tanker Ban Bill”), which changed regulations for large oil transports coming and going from ports on British Columbia’s northern coast, effectively banning such shipments and limiting the ability of Canadian firms to export to non-U.S. markets. Scrapping C-48 would remove one obstacle from the government’s agenda.
In 2023, the Trudeau government introduced a cap on Canadian oil and gas-related greenhouse gas emissions, and in 2024, adopted major new regulations for methane emissions in the oil and gas sector, which will almost inevitably raise costs and curtail production. Removing these regulatory burdens from Canada’s energy sector would also help Canada achieve energy superpower status.
Finally, in 2024, the Trudeau government instituted new electricity regulations that will likely drive electricity rates through the roof, while ushering in an age of less-reliable electricity supply: a two-handed slap to Canadian energy consumers. Remember, the throne speech also called for building a more “affordable” Canada—eliminating these onerous regulations would help.
In summation, while the waters remain somewhat muddy, the Carney government appears to have some good ideas for Canadian energy policy. But it must act and enact some hard legislative and regulatory reforms to realize the positive promises of good policy.
From the Fraser Institute
Myths, fallacies and ideological rhetoric continue to dominate the climate policy discussion, leading to costly and ineffective government policies,
according to a new study published today by the Fraser Institute, an independent, nonpartisan Canadian public policy think-tank.
“When considering climate policies, it’s important to understand what the science and analysis actually show instead of what the climate alarmists believe to be true,” said Kenneth P. Green, Fraser Institute senior fellow and author of Four Climate Fallacies.
The study dispels several myths about climate change and popular—but ineffective—emission reduction policies, specifically:
• Capitalism causes climate change: In fact, according to several environment/climate indices and the Fraser Institute’s annual Economic Freedom of the World Index, the more economically free a country is, the more effective it is at protecting its environment and combatting climate change.
• Even small-emitting countries can do their part to fight climate change: Even if Canada reduced its greenhouse gas emissions to zero, there would be
little to no measurable impact in global emissions, and it distracts people from the main drivers of emissions, which are China, India and the developing
world.
• Vehicle electrification will reduce climate risk and clean the air: Research has shown that while EVs can reduce GHG emissions when powered with
low-GHG energy, they often are not, and further, have offsetting environmental harms, reducing net environmental/climate benefits.
• Carbon capture and storage is a viable strategy to combat climate change: While effective at a small scale, the benefits of carbon capture and
storage to reduce global greenhouse gas emissions on a massive scale are limited and questionable.
“Citizens and their governments around the world need to be guided by scientific evidence when it comes to what climate policies make the most sense,” Green said.
“Unfortunately, the climate policy debate is too often dominated by myths, fallacies and false claims by activists and alarmists, with costly and ineffective results.”
Kenneth P. Green
Senior Fellow, Fraser Institute
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