Canada Looks to World War II Home-Building Strategy to Address Housing Crisis

Like many other nations, Canada has a nationwide housing crisis. There are simply not enough homes to meet the current demand, and affordable options are in even shorter supply.  

The federal government recently announced a plan to address this crisis: the revival of a Second World War-era housing program that addressed the need for more affordable housing after soldiers returned home from the war. 

Let’s take a closer look at the original World War II program, the plans for the new version of this program, and how it could potentially help solve Canada’s housing crisis. 

Canada’s “Victory Homes” of World War II 

Beginning during the Second World War and lasting into the 1960s, Canada’s “victory home” program was an initiative that led to the construction of thousands of homes in the suburbs of several major Canadian cities, such as Toronto, Halifax, and Ottawa.  

Initially, these homes were built for the factory workers who were building supplies for the war. Many migrant workers relocated to work in shipyards, building ships for the Canadian merchant marine. When the war ended, housing demand increased further as soldiers returned home. 

The Canadian government passed the Veterans’ Land Act of 1942, designed to ensure that returning veterans and their families had easy access to housing. This act included various measures regarding the financing and building of these homes, which were also known as strawberry boxes because their simple, square shape resembled the containers used to hold strawberries.  

This project was made possible through a standardized home design catalog, which allowed the government to build thousands of homes at a rapid pace. Justin Trudeau’s administration hopes to implement a similar program to increase housing supply and potentially reduce housing prices. This time around, however, the government will not be involved in constructing the homes—the designs will be made available to developers to streamline approvals, cut red tape, and hopefully reduce costs.  

Canada’s Victory Home Revival Initiative 

Canada’s government has scheduled consultations with housing sector stakeholders in January. The focus will be on creating standardized designs for low-rise homes, beginning with modular and prefabricated options, and then expanding to high-density plans.  

The goal is to develop affordable, energy-efficient, and labor-efficient home designs that are aligned with existing building codes to streamline the approval process for developers. The initiative aims for diversity within each design category, offering garden suites, laneway homes, and multiplexes for various needs like student housing or senior residences.  

The government views this plan as a way to rapidly build affordable homes without compromising quality or sustainability. The pre-approved designs could cut construction time by up to one year. Additionally, the sustainable building standards could eventually lower power bills for the residents of these new homes. 

Does Widespread Home Construction Help Reduce Housing Prices? 

There is a common belief that increased construction leads to gentrification and higher rents. In a 2022 survey, participants said that a sudden increase in housing stock would lead to rents either rising or staying the same, but not falling. However, recent research shows that this is a misconception.  

Researchers from New York University’s Furman Center analyzed dozens of studies to determine the impact of new construction on housing prices. Their analysis found that increased housing construction can drive down rents. For instance, studies from New Zealand and Germany showed that increased housing supply corresponded to rent decreases. The studies also suggested that in cities with rising rents, the rate of increase would have been even steeper without new housing. This refutes the common perception that more development always leads to higher prices. 

At the same time, understanding how new housing affects individual neighborhoods is complex, due to the variety of contributing factors. It can be challenging to isolate the local impact of new houses and apartments from other factors driving neighborhood price increases. An analysis in Minneapolis showed that new market-rate apartments had no significant effect on nearby rents overall, but led to a 6.6% increase in rents in the most affordable neighborhoods. 

New housing construction initiates a chain reaction of moves that can open up units for lower-income renters. Studies tracking resident moves following new apartment constructions in several U.S. cities back up these claims. This research has revealed that while new residents in freshly built units often came from high-income areas, subsequent moves eventually opened up opportunities for individuals from lower-income neighborhoods. This ripple effect from new housing suggests that it’s not solely outsiders benefiting from new constructions, but local communities as well. 

Can Policy Changes Help Alleviate the Housing Crisis? 

The debate on housing expansion is multifaceted, with questions concerning zoning reforms, market reliance, and equitable distribution of new housing. While new constructions have positive effects, they alone cannot address the housing crisis—especially for the lowest-income individuals.  

Lessons from historical programs and modern research suggest that more housing construction can mitigate the rise in rents and potentially alleviate housing pressures. However, addressing the impact of new construction on neighborhoods requires a nuanced understanding.  

 While Canada’s initiative holds promise, it should also prompt wider discussions on policy reform, equitable housing distribution, and what support is needed to truly assist the most vulnerable demographics.