September/2025

Canada’s Housing Affordability Crisis.

For much of Canada’s modern history, homeownership has represented far more than simply having a roof overhead. It has symbolized stability, personal success, and an enduring connection to community and nation. For generations, Canadians regarded buying a home as a natural milestone in life, one that secured their future and anchored their families in a place of belonging. Yet, in the last two decades, this dream has become increasingly elusive. What was once attainable for middle-class families has transformed into a source of stress and despair for millions. The cost of housing—whether in global metropolitan centers like Toronto and Vancouver, expanding mid-sized cities such as Hamilton or Kelowna, or even in smaller rural towns—has surged at an alarming pace. What used to be considered safe havens of affordability are now priced far beyond the reach of ordinary earners.

This crisis is not simply about economics; it reverberates across multiple dimensions of Canadian life. The inability to access affordable housing erodes social cohesion, deepens generational divides, and places mounting pressure on both urban and rural communities. Young adults delay forming households, starting families, or building careers because stable housing feels out of reach. Immigrants, who arrive with hopes of establishing new lives, find themselves squeezed between rising rents and inaccessible ownership markets. Retirees who once counted on downsizing for financial security are facing unprecedented competition and limited options. These challenges are altering demographics, influencing migration patterns, and reshaping the very fabric of Canadian society.

Understanding why housing has become so unaffordable requires looking at the intricate interplay of forces driving the problem. On the demand side, rapid population growth, fueled by immigration and urban migration, has collided with speculative investment and historically low interest rates. On the supply side, restrictive zoning policies, construction bottlenecks, and years of underbuilding have created chronic shortages. Government interventions, while intended to stabilize markets or protect consumers, have often had unintended consequences, further distorting prices and access. The result is a tangled web where no single factor alone explains the crisis; instead, it is the convergence of all these elements that has made housing unattainable for so many.

Resolving this crisis requires a fundamental rethinking of how Canadians perceive housing. Rather than treating it primarily as a vehicle for investment or wealth accumulation, society must recognize it as a basic human necessity. Only by adopting this paradigm shift—balancing financial markets with social responsibility—can Canada begin to chart a path toward restoring housing as a cornerstone of security and belonging, rather than a dream deferred.

I. The Demand-Side Deluge: A Multitude of Buyers

The relentless upward pressure on Canadian housing prices is first and foremost a story of intense demand, which consistently outstrips the available supply. This demand is not monolithic; it originates from several powerful and interlocking sources that have reshaped the country’s housing landscape.

1. Demographic Pressures and Domestic Demand

Canada is a nation in the midst of significant demographic change. Millennials—the largest cohort since the baby boom—have entered their prime home-buying years. This group, now in their late 20s to early 40s, represents a massive surge in intrinsic demand. Unlike previous generations, however, they face far steeper barriers to ownership due to skyrocketing prices and stagnant wage growth.

Adding to this demographic wave are changes in household formation. Rising divorce rates, delayed marriages, and a growing preference for independence among younger adults have led to smaller household sizes. A century ago, it was not unusual for three generations to live under one roof. Today, many Canadians prefer or are compelled to live alone, with single-person households becoming one of the fastest-growing categories. The net effect is that more individual housing units are required to accommodate the same population, intensifying demand even without dramatic overall population growth.

2. Immigration as a Key Driver

Immigration has always been a cornerstone of Canada’s nation-building strategy, but in recent years it has become one of the most powerful engines of housing demand. The federal government’s ambitious targets—welcoming over 500,000 new permanent residents annually—reflect the need to counter an aging population and labour shortages. While immigration contributes to economic growth, it also adds immediate pressure on housing markets.

Newcomers overwhelmingly settle in large metropolitan centres such as Toronto, Vancouver, Calgary, and Montreal, where job opportunities are concentrated. This clustering effect drives up demand in markets that are already supply-constrained. The situation becomes even more acute when temporary residents—international students and foreign workers—are factored in. For instance, in some urban areas, the influx of students has dramatically increased rental demand, straining the availability of affordable units. Although immigration enriches Canada culturally and economically, the mismatch between population growth and housing construction creates unavoidable friction.

3. The Financialization of Housing

Perhaps the most transformative change in recent decades has been the reconceptualization of housing. No longer viewed primarily as shelter, homes are increasingly seen as speculative assets—vehicles for wealth accumulation and financial security. This shift has generated a powerful feedback loop: as prices rise, buyers rush to purchase before they are “priced out,” and investors enter the market expecting continued appreciation.

● Domestic Investors:

The rise of the “mom-and-pop” investor is striking. Many Canadians now own multiple properties, financed by historically low interest rates and supported by tax policies that favour real estate. For middle-class households, buying a rental condo or second home has become a strategy for retirement planning. While rational at the individual level, this behaviour collectively tightens the housing market and drives up prices for first-time buyers.

● Corporate and Institutional Investment:

Large-scale investors, including Real Estate Investment Trusts (REITs) and private equity firms, have also entered the housing market aggressively. Their acquisitions of entire apartment complexes or portfolios of single-family homes have reduced ownership opportunities for individuals. By focusing on rental conversions, they limit supply available for purchase, reinforcing affordability challenges.

● Foreign Capital:

In the early 2010s, Canadian real estate, particularly in Vancouver and Toronto, became a magnet for global capital. Perceived as a safe and stable investment, Canadian property attracted significant foreign buyers, especially in the luxury sector. While policy measures like foreign buyers’ taxes have dampened some of these inflows, the initial surge helped push prices upward, creating ripple effects throughout the broader market.

Together, these dynamics illustrate how the financialization of housing distorts markets: homes become commodities rather than necessities, driving demand to levels far beyond natural demographic needs.

4. The Low-Interest-Rate Environment

The final driver on the demand side is monetary policy. Following the 2008 global financial crisis, the Bank of Canada adopted a prolonged period of historically low interest rates. Borrowing costs plummeted, making mortgages far more accessible.

Consider a household with the capacity to pay $2,000 per month toward housing. At a 2% mortgage rate, they could afford a much larger loan than at a 5% rate. This effectively increased purchasing power, bidding up housing prices as buyers competed for limited stock. The availability of cheap credit not only encouraged owner-occupiers but also turbocharged speculative buying and investment.

The COVID-19 pandemic intensified this phenomenon. Emergency rate cuts in 2020 fueled another wave of demand, with many households leveraging cheap mortgages to upgrade homes or enter the market earlier than planned. The result was unprecedented price growth, further detaching housing values from local incomes.

II. The Supply-Side Squeeze: Why We Can’t Build Fast Enough

While demand dynamics explain much of the crisis, the problem cannot be understood without considering the equally severe supply-side constraints. Canada simply does not build enough homes to keep up with population growth, immigration, and shifting household structures.

1. The “Missing Middle” and Restrictive Zoning

One of the most persistent barriers to adequate supply is restrictive municipal zoning. In many Canadian cities, vast residential areas are zoned exclusively for single-detached homes. These rules effectively ban denser and more affordable housing types such as townhouses, duplexes, triplexes, and low-rise apartments.

This has created what urban planners call the “missing middle.” Cities are polarized between high-rise towers and single-family homes, with little in between. Yet it is precisely these mid-density housing options that could provide attainable alternatives for middle-income families. Without them, buyers are left with an unappealing binary choice: cramped apartments in high-density zones or prohibitively expensive detached houses.

Changing zoning laws is notoriously slow and politically fraught. Proposals to allow more density often face opposition from local residents, a phenomenon known as “NIMBYism” (“Not In My Backyard”). Opponents cite fears of increased traffic, parking shortages, changes to neighbourhood character, or even reduced property values. As a result, municipal councils frequently water down or delay reforms, keeping new supply far below what is needed.

2. Construction Bottlenecks and Labour Shortages

Even when zoning allows for new development, Canada faces severe construction bottlenecks. Labour shortages in the skilled trades, rising material costs, and complex permitting processes all slow down the pace of building. The COVID-19 pandemic further disrupted global supply chains, inflating the cost of lumber, steel, and other essential inputs. Developers, facing uncertainty and higher costs, often delay or cancel projects.

Moreover, the industry itself struggles with productivity challenges. Compared to other developed countries, Canada’s construction sector has seen relatively little innovation in building techniques. Prefabricated housing and modular construction, which could speed up delivery, remain underutilized. This inefficiency prolongs project timelines and keeps housing completions below the levels required to meet demand.

3. Underbuilding and Legacy of Neglect

Decades of underbuilding have left Canada with a massive housing deficit. The Canada Mortgage and Housing Corporation (CMHC) estimates that the country needs millions of new homes by 2030 to restore affordability. This shortfall is the product of years of insufficient investment in both private and public housing.

During the post-war period, governments played a more active role in financing and constructing affordable housing. But beginning in the 1990s, public housing investment declined sharply as responsibility shifted to provinces and municipalities. At the same time, private developers focused on higher-end projects that maximized profits, leaving affordable housing undersupplied. The cumulative effect of these choices is a structural shortage that cannot be corrected overnight.

4. Land Costs and Speculative Holding

Finally, land scarcity and speculation also choke supply. In major cities, the price of land itself has skyrocketed, making it difficult for developers to construct affordable units. In some cases, landowners “sit” on vacant lots, waiting for property values to rise before selling or developing. This speculative behaviour locks away land that could otherwise be used to meet pressing housing needs.

III. The Human and Societal Toll: Consequences of the Crisis

Canada’s housing affordability crisis is not a distant economic abstraction. It manifests in the lived experiences of millions of Canadians and is reshaping the social, economic, and psychological landscape of the nation.

1. Intergenerational Inequality

Perhaps the most visible consequence is the widening generational divide. Baby boomers and older Canadians who purchased homes decades ago have seen their net worth soar as property values appreciated, often tax-free due to the principal residence exemption. For many, housing equity has become the cornerstone of retirement security.

In contrast, younger generations—millennials and Gen Z—face the bleak prospect of being lifelong renters. They are unable to accumulate the same kind of wealth or financial stability, despite often having higher educational attainment and comparable incomes in real terms. This divergence risks entrenching a permanent wealth gap between age cohorts, undermining social mobility and fueling intergenerational resentment.

2. Erosion of Economic Competitiveness

Housing affordability also affects the broader economy. When households allocate 40–60% of their income to housing costs, less money circulates in other sectors such as retail, tourism, or innovation. Consumption becomes distorted, and economic growth slows.

Businesses are not immune. Employers in high-cost cities struggle to recruit and retain workers, as prospective employees balk at the impossibility of living near their workplaces. Even essential services—teachers, nurses, firefighters—face difficulty securing housing in the communities they serve. This creates labour shortages, strains public services, and undermines the competitiveness of Canadian cities in attracting global talent.

3. Social and Psychological Strain

Beyond economics, the human toll is immense. Housing precarity—defined as the insecurity of not knowing whether one can afford rent, avoid eviction, or remain in a chosen community—is a major source of stress and anxiety. Families forced into overcrowded or unstable living conditions experience higher rates of conflict and mental health challenges.

Long commutes, often the only option for those priced out of urban centres, contribute to fatigue, lost time, and deteriorating quality of life. At the extreme end of the spectrum, the crisis fuels rising homelessness, visible in tent encampments in cities like Toronto, Vancouver, and Ottawa. The inability to guarantee shelter erodes dignity and exacerbates health disparities, pushing vulnerable populations further to the margins.

4. Geographic Polarization

Finally, the crisis is reshaping Canada’s geography. Wealthier households cluster in urban cores, bidding up prices and reinforcing exclusivity. Middle- and lower-income families are displaced to exurbs or small towns where housing is cheaper but job opportunities are fewer.

This geographic sorting deepens inequality, creating socio-economic enclaves. Diverse, mixed-income communities—once a hallmark of Canadian cities—are eroding. Instead, urban spaces risk becoming segregated by wealth, undermining social cohesion and the inclusivity that Canada prides itself on.

IV. Policy Responses and the Path Forward

Governments at all levels have acknowledged the crisis and introduced policies to address it. Yet the results have been uneven, reflecting the complexity of the problem.

1. Demand-Side Measures

Several measures have sought to temper demand, particularly speculative and foreign-driven demand. British Columbia and Ontario introduced foreign buyer taxes, while the federal government enacted the Underused Housing Tax. These policies had short-term cooling effects but did not fundamentally alter long-term trends.

More recently, the Bank of Canada’s aggressive interest rate hikes have reduced purchasing power, slowing the pace of sales and slightly softening prices. However, this remedy is double-edged: while it dampens demand, it also burdens existing homeowners with variable-rate mortgages and risks tipping the economy into recession.

2. Supply-Side Initiatives

Recognizing the limits of demand controls, policymakers have shifted focus toward increasing supply. The federal government’s National Housing Strategy, including the Housing Accelerator Fund, aims to encourage municipalities to reform zoning and expedite approvals. Provinces such as Ontario and British Columbia have gone further, overriding municipal bylaws to permit “missing middle” housing like duplexes and multiplexes on lots previously reserved for single-family homes.

These reforms represent a significant shift in approach, but they face practical hurdles. Municipal governments, often beholden to local voters resistant to change, may resist implementation. Meanwhile, construction industry bottlenecks remain unresolved. Nonetheless, supply-side policies are widely considered the most promising avenue for restoring affordability.

3. The Need for a Paradigm Shift

Incremental reforms, however, will not suffice. A deeper rethinking of housing policy is required.

● Decoupling Housing from Investment: Current tax structures, particularly the exemption of capital gains on primary residences, incentivize speculation and wealth hoarding in housing. Reforming these incentives could help shift perceptions of homes as places to live rather than vehicles for profit.

● Massive Investment in Non-Market Housing: Canada once had a strong tradition of building co-ops, social housing, and purpose-built rentals insulated from market pressures. Reviving and expanding this sector would provide long-term affordability for those excluded from ownership.

● A Coordinated “All Hands on Deck” Strategy: The housing crisis cuts across federal, provincial, and municipal jurisdictions. Fragmented approaches will fail without unified leadership and shared goals. A coordinated national effort, grounded in the recognition of housing as a fundamental human right, is essential.

Canada’s housing affordability crisis is a Gordian knot of excessive demand, restricted supply, and financialization. It has been decades in the making, and no single policy can untangle it overnight. Recent interest rate hikes have cooled markets temporarily, but they also highlight the fragility of a system built on unsustainable debt and speculative expectations. The path forward is difficult but not impossible. It will require political courage to confront vested interests, challenge entrenched zoning practices, and reform tax policies that perpetuate speculation. It will also demand a renewed commitment to building housing for people, not just for profit.

At stake is far more than real estate values. The crisis touches on the very character of Canada—its social equity, its economic dynamism, and its promise to future generations. Reclaiming housing as a foundation of community, stability, and dignity is essential if the Canadian dream is to endure.