Canada's Housing Affordability Dilemma: No Easy Fix in Sight

Bank of Canada senior deputy governor Carolyn Rogers says that housing affordability in Canada is a complex issue that won't be solved anytime soon. In a recent speech, she outlined the dilemma at the center of the problem: families have less money to spend on other things when they're paying high rent or mortgage payments.

This situation weighs heavily on economic growth, Rogers explained. Lower housing prices can bring some relief for homebuyers, but it also reduces household wealth, weakens spending, and slows sales activity as well as new construction.

Rogers noted that many policies and regulations have been introduced over the years to address housing affordability issues, including Canada's mortgage stress test, which was established in 2017. However, these measures have had limited impact on improving affordability or reducing rising home prices.

The Bank of Canada's low interest rate policy also played a role in increasing housing demand and prices. While it supported the economy during the COVID-19 pandemic by making mortgages cheaper, it also increased housing demand and prices followed.