Build more homes—but don’t lock Canada into higher emissions

Published in The Hill Times.

As Canada races to fix its housing affordability crisis, one issue is consistently treated as an afterthought: how to close the housing supply gap without creating higher residential greenhouse gas emissions for decades to come.

With the Canada Mortgage and Housing Corporation (CMHC) and the Parliamentary Budget Office (PBO) estimating that between 290,000 and 480,000 new homes are needed each year to restore affordability, the choices Canada makes now will shape both its housing market and its emissions profile for a generation.

When Canadians think about emissions, attention usually turns to heavy industry and large emitters. Yet the residential sector remains a significant driver of Canada’s emissions profile. In 2022, residential energy use accounted for 12 per cent of Canada’s total final consumer energy use, trailing only the industrial and transportation sectors.

The problem becomes clearer when looking at how homes use energy. In Canada, 78 per cent of residential energy consumption is from space and water heating, with space heating accounting for 60 per cent. Gains in appliance and lighting efficiency have helped, but they are marginal compared to the energy required to heat homes in cold climates.

Natural gas remains the backbone of residential heating, supplying 54 per cent of space-heating and 70 per cent of water-heating energy. The emissions impact is even more lopsided: natural gas systems account for 80 per cent of all space-heating GHG emissions. Electricity, the other main source of energy use in homes, represents only about 23 per cent—a reflection of Canada’s low-emissions electricity grid profile.

These emissions are not evenly distributed across the country. Ontario and Alberta contribute 45 per cent and 22 per cent, respectively, of total national residential GHG emissions, excluding electricity. The former’s emissions reflect its population size, while the latter’s stem largely from heating systems still heavily dominated by natural gas.

Encouragingly, with the number of households increasing in Canada, total residential GHG emissions excluding electricity largely plateaued between 2015 and 2022, and emissions per household dropped 13 per cent in the same period. But reducing emissions intensity will not achieve Canada’s net-zero goals.

As Canada builds more homes, progress will be tested. Using conservative estimates of annual housing starts of 235,000—lower than CMHC and PBO suggest is needed to close the housing supply gap, but higher than any sustained pace Canada has achieved—the country would reach roughly 18 million households by 2035. Continuing to reduce total emissions across that many homes is an unprecedented challenge.

New homes matter, but the real constraint is the “stickiness” of existing housing stock. Most Canadian homes in 2022 were built between 1984 and 1995, and nearly 10 per cent date from before 1946. New homes are vastly more efficient due to improved construction techniques and stricter building codes, and upcoming National Building Code changes requiring “net-zero energy ready” standards will help. But new builds still represent only a fraction of the housing stock. That means the real battle for emissions reductions will be won in the basements of existing homes, and retrofitting and changing the way Canadians live today is where the rubber will hit the road.

Although there is no one silver bullet, a basket of policies can help.

Emissions reductions in our homes ultimately depend on Canadians and their ability to invest in upgrades. Rebates should prioritize heat pumps and dual-fuel systems that help households transition away from oil or wood, while removing energy-audit requirements that delay replacements when appliances fail.

Programs like the Canada Greener Homes Affordability Program should be rolled out in partnership with all provinces and expanded to serve a wider range of incomes, particularly given the mounting pressure inflation has placed on Canadian households.

And while electrification of heating systems sounds like an easy way to stop using natural gas, the reality is provincial electricity grids are already forecasting load growth from artificial intelligence and quantum compute power requirements. Continued investment in demand-side management and responsive pricing will be essential to balance electrification with other system demands.

As Canada undertakes the largest housing build-out in its history, the worst outcome would be solving one crisis by quietly worsening another.

Kate Koplovich is a senior policy analyst for energy with the C.D. Howe Institute.