Fixing affordability will cost nearly $2 trillion according to this economist

Restoring housing affordability in Canada could require as much as $1.7 trillion in additional investment over the next decade, according to a new analysis from economist Charles St-Arnaud. According to Arnaud, the country's housing shortage cannot be solved without dramatically increasing construction spending. Charles St-Arnaud, chief economist at Servus Credit Union, estimates Canada will need to build roughly 4.8 million homes over the next 10 years to return affordability to more sustainable levels. Achieving that goal would require annual investment in residential construction to rise well beyond current levels, placing new pressure on governments, investors and households already facing mounting financial challenges.

The report builds on Canada Mortgage and Housing Corporation's estimate that 4.8 million homes must be constructed over the next decade to restore affordability. St-Arnaud calculates that delivering those homes would cost between $2.4 trillion and $3.6 trillion, assuming an all-in construction cost ranging from $500,000 to $750,000 per unit. Because roughly 2.5 million homes are already expected to be built under existing forecasts, the additional investment needed falls between $1.2 trillion and $1.7 trillion, illustrating the scale of Canada's housing supply challenge.

Canada investing in construction

Canada invested approximately $116 billion in new residential construction during 2025. Maintaining that pace for the next decade would generate roughly $1.2 trillion in total investment, about half of what may ultimately be required to meet housing targets. St-Arnaud estimates annual residential construction spending would need to increase to roughly two or three times its current level if Canada hopes to close the affordability gap. He notes the overall cost could be reduced through lower development charges, greater adoption of factory-built housing and improvements in construction technology that increase productivity across the building sector.

While the report focuses on housing, St-Arnaud argues new home construction cannot be viewed in isolation. Canada is simultaneously facing growing demands to invest in transportation infrastructure, defence, electricity generation and productivity-enhancing projects. Those priorities will compete for the same pool of domestic and international investment capital. Governments, businesses and developers will all require financing at the same time, increasing pressure on financial markets and potentially making it more difficult to secure funding for major projects without offering higher returns to investors.

The report argues Canadian households are unlikely to provide enough additional capital on their own. Households have been net borrowers since the late 1990s, largely because of mortgage debt and residential real estate investment. Reversing that trend would require Canadians to borrow less, reduce existing debt and increase personal savings at a time when many continue struggling with elevated housing costs and broader affordability pressures. As a result, St-Arnaud concludes Canada will likely need to rely much more heavily on foreign investment to finance the expansion of housing construction.

Attracting greater international investment, however, will require Canada to remain competitive with other markets seeking the same capital. St-Arnaud argues investors will expect predictable returns, greater certainty that projects can be completed on schedule and fewer regulatory risks before committing significant funds. Without those conditions, capital may instead flow to jurisdictions offering stronger returns or lower investment uncertainty. The report suggests that improving project approval timelines and reducing barriers to construction could make Canadian housing developments more attractive to institutional investors and global financial markets.

Higher demand for investment capital could also produce unintended consequences for the broader economy. If governments and developers must offer higher interest rates or returns to attract financing, borrowing costs across the economy could remain elevated for longer. That would increase financing expenses for housing developments, infrastructure projects and private businesses alike. Some developments that appear financially viable today could become uneconomical if borrowing costs continue rising, reducing the total amount of housing and infrastructure ultimately delivered despite increased demand for new construction.

St-Arnaud suggests governments could help address those challenges by encouraging pension funds, asset managers and individual households to direct more investment toward Canadian projects. He also argues financial regulations could be adjusted to encourage greater business lending while reducing the economy's long-standing dependence on household borrowing. Although the precise cost of restoring housing affordability remains uncertain, the report concludes the challenge extends far beyond building more homes. Meeting Canada's housing targets will require unprecedented levels of investment, sustained policy reforms and access to significantly more capital than the country currently commits to residential construction.