Homebuilding is our economic engine

By Richard Lyall

for Canadian Contractor

April 16, 2026

Amid the political noise and intensifying frustration around the housing crisis, one critical point seems to be missed: housing affordability isn’t just a social issue, it’s an economic one as well.

For years, the debate has been framed primarily in social terms - fairness, accessibility, and quality of life. Those matter. But focusing only on those dimensions misses a larger, more urgent reality.

Housing is one of the most powerful economic engines in the country, and when it stalls, the consequences ripple far beyond the construction site.

A growing body of research is now making that case clearly. A study from Concordia University’s John Molson School of Business reframes housing policy as economic policy. The report, Build and Benefit: How Homebuilding Incentives Can Pay Off for Cities, Homeowners and Local Economies, found that boosting housing supply and improving affordability can deliver immediate and sustained economic benefits.

The report found that investment in homebuilding, including streamlined approval processes and reduced input costs, can quickly translate into more affordable housing and wider economic benefits.

That observation cuts to the heart of the issue. When housing becomes unaffordable, households are forced to divert more of their income toward shelter, leaving less to spend in the broader economy. Local businesses suffer. Investment slows. Labour mobility declines as workers are priced out of key markets. Municipal revenues weaken. The economic drag is real.

The Concordia study also quantifies what it would take to meaningfully improve affordability. Canada would need to more than double its housing construction rate to between 3.5 and 4.1 per cent of existing supply annually. That translates into tens of thousands of additional homes each year in major cities - roughly 96,000 in Toronto alone.

The good news is that relatively straightforward policy changes could help. The study finds that cutting approval delays by just 20 per cent could improve affordability by 17 per cent. That is not a marginal gain - it is transformative. Faster approvals, lower input costs and more efficient development processes would not only increase supply but also stimulate local economies as households regain spending power.

But if the upside is significant, the downside of inaction is even more alarming.

A report by the Canadian Centre for Economic Analysis suggests that, without policy intervention, about 35,000 Ontario residential construction workers could potentially be displaced, on average, over the next 10 years, while 390,000 fewer Ontarians would be housed.

These are not abstract projections. They represent real economic dislocation - fewer jobs, weaker growth and a diminished standard of living.

The economic effects could be devastating. Ontario could face a 1.5 to 2.5 per cent reduction in GDP as early as 2026–27 tied directly to a collapse in residential construction. That is not a typical cyclical downturn - it is a structural weakening of one of the economy’s core sectors.

The damage would not stop there. A prolonged slowdown would erode the construction workforce, disrupt apprenticeship pipelines, and lead to a loss of knowledge that could take years to rebuild. Supply chains would contract. The housing ecosystem would become more fragile.

All of this is happening against the backdrop of a long-term affordability crisis that has been building for decades.

Twenty-five years ago, a typical home in Ontario cost roughly three to four times the average household income - a level widely considered affordable. Today, that ratio has ballooned to seven to nine times income in many markets, and even higher at the peak of the pandemic housing surge.

While higher interest rates have cooled prices somewhat, affordability remains deeply out of reach for many households. By most measures, home prices are still 35 to 40 per cent higher relative to incomes than they were a decade ago.

Improving the affordability of new housing must be treated as an economic priority. We need policies that reduce development costs, streamline approvals, and expand the supply of land.

The benefits extend far beyond the housing market. More construction means more jobs. More affordable homes mean more disposable income. Stronger local economies generate higher tax revenues.

Building more homes - and making them more affordable - is one of the most effective economic strategies available. The alternative is a very slow and painful erosion of our economy.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.