Canada Still Far from Restoring Housing Affordability

Canada's central bank is saying that restoring housing affordability will take time. According to senior deputy governor Carolyn Rogers, while Canada is on the right track in addressing the issue, there is still a way to go. To improve housing affordability, more supply is needed along with better planning and infrastructure, regulations that protect resilience, and incentives that do not add demand to an already short market.

Rogers stated that house prices going up push rents higher and limit people's ability to buy, while falling prices shrink overall household wealth. 'It feels a bit like a trap,' she said. The BoC needs to balance policy goals, which could include increasing supply, protecting resilience, and reducing the economy's dependence on rising house prices.

Monetary policy can influence demand across the economy, including housing demand, but it is too blunt of a tool to deal with affordability issues. There are no simple fixes to the monetary policy framework that can help. Rogers emphasized that the BoC needs to explain these trade-offs better and be clear with Canadians about what monetary policy can and cannot do.