The Looming Crisis of Housing Affordability in Canada

Housing affordability in Canada is a topic that has garnered significant attention from policymakers, economists, and the general public alike. Recent reports from the Canada Mortgage and Housing Corporation (CMHC), the Bank of Canada, and RBC have shed light on the deteriorating state of housing affordability in the country. This blog post aims to provide a comprehensive overview of the current landscape, drawing insights from these authoritative sources.

The State of Housing Affordability:

According to the CMHC's chief economist, housing affordability in Canada is set to deteriorate unless immediate actions are taken. The Bank of Canada also highlights the inflationary pressures affecting the real estate market. RBC's report states that restoring housing affordability will take years and concerted efforts, short of a housing crash.

The Supply-Demand Imbalance:

CMHC's 2022 Rental Housing Survey reveals that markets are tightening in many centers across Canada. This is driven by higher demand due to a rebound in immigration and robust employment markets. On the other hand, supply has been unable to adjust to this demand, despite an increase in construction.

The Role of Interest Rates:

Rising interest rates have further complicated the issue. Higher rates have reduced homeownership opportunities for many tenants, making the rental market even more competitive.

New Indicators Raise Concerns:

CMHC introduced two new indicators in its 2022 survey. The first measures the share of units that are affordable for the lowest income group of renters. The results are worrisome; in major centers like Vancouver and Ontario cities, the market share that is affordable for low-income households is less than 5%.

The Rental Gap:

The second new indicator from CMHC allows us to measure the average rent for newly rented units. Significant differences exist between the average rent for occupied units and the average rent for newly vacant units, especially in cities like Toronto and Vancouver.

The issue of housing affordability in Canada is multi-faceted and requires a multi-pronged approach. While market forces could restore some balance, relying solely on them seems insufficient. Concerted efforts from both the public and private sectors are essential to address this looming crisis.