By Paul Vieira


OTTAWA--Canada, facing a sizable housing shortage, said Tuesday it has instructed officials to identify surplus office space that could be converted into residential units.

Officials at a press conference in the capital said the hybrid-work model developed since the pandemic provides a chance to reduce office space. "We are working together to accelerate the process to identify further assets that have the potential to be repurposed into housing for Canadians," said Jean-Yves Duclos, the country's public-services minister, who has responsibility over the government's real-estate portfolio.

Canada data estimate the federal government acts as the custodian for over 600 million square feet of office space, and half of that portfolio is in the metropolitan Ottawa area. Over the next five years, the government expects over half of the office-space leases to expire.

The national housing agency, Canada Mortgage and Housing Corp., said the country will require over three million additional homes above current home-building projections by 2030 to restore housing affordability.

Converting office space into housing units has its challenges, as U.S. cities are discovering. Developers last year created just 3,575 apartment units in the U.S. through office conversions, according to an analysis by rental listing site RentCafe. That amounts to less than 1% of all apartments built that year through new construction. Construction loans are also far more expensive than they were 18 months ago and many banks now shy away from development lending.

Canada is "at a moment where there is a broad recognition that collectively, we have to have more urgency on building more housing supply," said Finance Minister Chrystia Freeland. "We have a growing population. In order to be a growing country, we have to build more homes faster."

Recent polling from Ottawa-based Abacus Data indicated 45% of respondents say the Liberal government "has exacerbated the housing issue," in part due to aggressive immigration intake that is fueling historic population growth.


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

11-07-23 1051ET