Housing affordability is a growing concern in Canada, which is one of the few Western nations that largely depends on market forces to supply its housing stock. It has emerged as a mounting policy issue as federal and provincial governments struggle with addressing the social and economic implications of affordability and the potential consequences of a sharp market correction.
To put the issue in context, about 95 percent of Canadian households obtain their housing on the open market. During the post-2008 recession period, housing markets have been relatively strong – spurred by the historically low mortgage interest rates. At the same time, strong demand and constrained supply have significantly increased housing prices, raising affordability challenges for many households. In fact, housing affordability today is worse than at any time since the beginning of the 2000s. In 2011, Canadians spent more than 40% of their household income on rent and utilities which increased to above 50% in 2015.
Many factors affect housing affordability in Canada. For example, purchasers of single-detached houses face significant government-imposed costs, including fees, charges, levies, and taxes. Moreover, under the growing use of densification strategies, urban plans have tended to restrict low-density in favor of medium and high-density housing.5 The result has exacerbated the affordability crisis. In such ‘spatial confinements of supply’, increased demands are accumulated, leading to an overall price hike.