Rogers Warns Interest Rates Can't Fix Canada's Housing Affordability Crisis

Canada's housing market has become too large for interest rates to fix alone, according to Carolyn Rogers, Senior Deputy Governor of the Bank of Canada. In a recent speech to Victoria's business community, Rogers explained that the central bank cannot set different interest rates for housing and other sectors, nor can it directly address supply constraints.

Rogers cited data showing that residential investment now accounts for over 50% of Canada's gross domestic product, while business investment in machinery, equipment, and innovation has declined to around 8%. The gap between home prices and incomes has widened significantly, with prices rising 53% between 2015 and 2025, while incomes grew by only 13%.

The mortgage stress test introduced in 2017 was intended to provide borrowers with a buffer against rate risk and strengthen financial system resilience. However, it did not arrest price growth, highlighting the challenge of using monetary policy to address affordability issues.

Rogers emphasized that real progress on affordability requires more housing supply, better planning and infrastructure, and a deliberate effort to reduce Canada's economic dependence on perpetually rising home values. These levers rest with federal, provincial, and municipal governments, not the Bank of Canada.