Canada is still a long way from restoring housing affordability to pre-pandemic levels, the Bank of Canada has warned, with the country facing a significant shortage of homes.
Senior Deputy Governor Carolyn Rogers said housing affordability remains one of the country's most pressing economic challenges, affecting both homeowners and renters. She made the comments in a speech in Victoria, British Columbia, on Thursday.
Rogers said affordability is about more than the ability to purchase a home. When households spend a large share of their income on rent or mortgage payments, they have less money available for everyday spending, savings and unexpected expenses.
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Canada has seen some improvement in housing conditions, including lower home prices in several markets. However, the central bank said falling prices alone do not solve the wider affordability problem and can also weigh on household wealth, housing activity and new construction.
The Canada Mortgage and Housing Corporation estimates that the country needs between about 417,000 and 469,000 new homes each year to restore housing affordability to pre-pandemic levels by 2036. Current construction projections remain below that requirement.
CMHC said the housing supply gap remains broadly unchanged from its previous assessment. While some markets, including Toronto and Calgary, have seen the gap narrow, it has widened in Ottawa and Montreal, while Vancouver's gap has remained broadly unchanged.
The housing challenge is particularly significant in the ownership market. CMHC said new condominium and ground-oriented housing construction has weakened, reducing the supply of homes available to prospective buyers. At the same time, rental markets have become more balanced in some areas as vacancy rates rise and rent growth slows.
Recent Statistics Canada data also illustrates the pressure on households. In 2024, 23.2% of Canadian households were living in housing considered unaffordable because they were spending at least 30% of their income on shelter costs. The figure was higher among renters, at 33.7%.
The Bank of Canada has also noted that the typical Canadian home price has fallen by about 5% over the past year and 20% from its 2022 peak. Despite those declines, high household debt and mortgage-renewal costs continue to create financial pressure for some borrowers.
Rogers said restoring affordability will require a sustained increase in housing supply. That means building more homes while ensuring that the types of properties being constructed match the needs of Canadians.
The latest assessment suggests that lower prices and changing mortgage conditions may provide some relief, but a lasting improvement in housing affordability will depend heavily on Canada's ability to close its housing supply gap over the coming decade.