Prime Minister Mark Carney's new federal budget has drawn criticism for its inadequate response to Canada's housing crisis. The budget fails to address the overregulation that hampers the construction of new homes, despite a significant national shortage of approximately 2.6 million units, according to the Canada Mortgage and Housing Corporation (CMHC). This shortage has contributed to a doubling of the inflation-adjusted price of an average Canadian home since the early 2000s, as demand continues to outstrip supply.

To tackle the issue, the Trudeau government previously reduced its permanent immigration targets by over 20 percent, from 500,000 to fewer than 395,000 annually. Temporary immigration targets were also cut from 6.2 percent to 5 percent of the population. Carney's budget further reduces temporary immigration by 25 to 32 percent, aiming to "responsibly manage immigration to alleviate pressures on housing demand." While this slowdown has already eased rental prices, the impact on home sales and purchase prices may take longer to materialize, as new immigrants typically do not buy homes for several years after arriving.

Despite these immigration cuts, experts emphasize that the real solution lies in increasing housing supply. Currently, Canada averages about 250,000 housing starts per year, which is insufficient to meet demand. The budget introduces a new initiative called Build Canada Homes, allocating $7.28 billion over five years to primarily construct "non-market" affordable housing. This investment averages approximately $1.46 billion per year, which is only half of what the Liberals promised to spend on affordable housing during the recent election campaign.

The budget aims to build 45,000 units, including at least 4,000 factory-built homes, with much of the development occurring on public land. An additional $1 billion is earmarked for transitional and supportive housing for the homeless and those facing housing insecurity. However, past programs like the Rapid Housing Initiative (RHI) have faced challenges, with only 8,981 of the promised 12,000 affordable units completed so far.

Affordable housing programs have proven to be costly and yield limited results. The RHI, for instance, built an average of 2,245 units per year at a cost of $240,000 per unit. If similar costs apply to the Build Canada Homes initiative, it could deliver only about 30,000 units over five years, addressing roughly 1.2 percent of Canada's housing needs.

The budget also fails to address municipal development charges, which have significantly increased and contribute to housing unaffordability. In Toronto, the charge for a two-bedroom apartment has surged to $81,000. The Liberals previously promised to pressure municipalities to reduce these charges by half, but Carney's budget reduces the program budget and uses vague language regarding the extent of the reductions.

Moreover, the budget does not mention zoning reform, which is crucial for increasing housing supply. Many municipalities reserve most residential land for single-family homes, making it illegal to add density in these areas. Although the federal government cannot directly enforce zoning changes, it can incentivize municipalities by linking infrastructure funding to pro-housing reforms. However, follow-through on this strategy has been lacking.

While the budget includes commitments to finance rental properties and train new builders, these measures are seen as insufficient. Carney's earlier promise to provide tax incentives for multi-unit home construction is notably absent from the budget. Although there is a proposal to cut GST for first-time home buyers, experts warn that without increased supply, this could exacerbate bidding wars and drive prices higher.

Critics of Carney's approach include economist Mike Moffatt, who described the budget as "disappointing," and Eric Lombardi, founder of More Neighbours Toronto, who stated that the federal government's message suggests that middle-class homeownership is no longer attainable. The budget's lack of substantial measures to address the housing crisis has left many experts and advocates concerned about the future of affordable housing in Canada.