Canada’s Housing Market in Crisis

The dream of owning a home, which has long symbolized reaching a comfortable position in the Canadian middle class, is diminishing. This decline is not limited to major cities known for their high real estate prices like Toronto and Vancouver but is spreading to smaller towns and communities across the country.

Parents are increasingly worried that their children may never be able to afford a home, and this concern is well-founded. A recent study by the Royal Bank of Canada revealed that with the costs of homeownership compared to median household incomes at their highest levels since the 1980s, more than half of the projected 1.9 million new households by 2030 will likely be unable to purchase a home.

Furthermore, those who are unable to enter the housing market face steep rental increases, reaching around 9% annually nationally and as high as 15.7% in Alberta. The competition for rental housing is fierce due to near-zero vacancy rates as Canada's population continues to grow.

These challenges are the result of various decisions and events over time, many of which could have been avoided. Issues range from misguided policies to planning decisions that lack foresight.

For instance, between 2016 and 2021, Toronto only increased its inventory of three-bedroom-plus homes by 0.6%, adding just 2,585 units. In contrast, Peterborough constructed 4,005 net new dwellings during the same period, with nearly 75% of them having three bedrooms or more, representing a 7.7% growth in larger homes.

The shift towards smaller living spaces is evident in Toronto, where bachelor units saw a significant 28% increase, jumping from 22,355 to 28,765 units.

Housing affordability is a relative concept based on income and savings. According to the Canadian Real Estate Association, the benchmark price for a single-family home in Alberta is $649,300, while in Toronto, it's almost double at $1.35 million.

The housing market is becoming a focal point for the upcoming federal election, with politicians showing a renewed interest in addressing Canada's housing crisis. Efforts are being made to stimulate home construction on various fronts, although challenges such as rising construction costs, limited access to capital, and zoning restrictions pose significant obstacles.