The way back to housing affordability

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[Visual: Rapid succession of views of residential areas from a large city. Animated transition to the on-screen title "Ask an expert".]

JOELLE HAMILTON: From renters to homebuyers, Canadians everywhere are feeling the housing crunch.

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[Visual: Animated transition to the on-screen title "Is there a way back to affordability?".]

But is there a way back to affordability?

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[Visual: Animated transition to host Joelle Hamilton speaking to the camera, sitting at a desk on which a laptop computer, a mouse and a mug are placed.]

[On-screen identification in the lower third: Joelle Hamilton, Communications & Marketing, CMHC]

In this episode, we'll explore the evolution of housing affordability challenges over the past 20 years, key insights from the latest data, and what benchmark we should use for affordability.

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[Visual: Animated transition to the on-screen title "Evolution of Housing Affordability Challenges (2004 – 2024)". Animated transition to Joelle Hamilton speaking to the camera.]

Housing affordability has been a growing challenge for Canadians, especially in the years leading up to and following the COVID-19 pandemic. To understand how we got here, let's look at the trends from 2004 to 2024.

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[Visual: Animated transition to guest Mathieu Laberge, sitting in an office, speaking to the camera.]

[On-screen identification in the lower third: Mathieu Laberge, Chief Economist and SVP, Housing Insights]

MATHIEU LABERGE: Between 2004 and 2024, housing affordability steadily worsened, with a significant spike during the pandemic.

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[Visual: Animated transition to the on-screen title "Rent-to-Income Ratios and Homeownership Costs Rise", accompanied by a graphic illustrating the rise of ratios over the years.

Animated transition to the on-screen title "Rent-to-income ration in Halifax, accompanied by a map of Canada focusing on Halifax and displaying the following data.]

• 24.8% (2006)
• 25.2% (2019)
• 28.1% (2023)

For renters, we saw rent-to-income ratios rise sharply, particularly in cities like Halifax, where this ratio went from 24.8% in 2006, 25.2% in 2019 and 28.1% in 2023.

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[Visual: Animated transition to Mathieu Laberge speaking to the camera.]

Similarly, for homebuyers and homeowners, mortgage repayment and down payment affordability deteriorated across the country.

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[Visual: Animated transition to the on-screen title "Homebuying Repayment Affordability in Calgary", accompanied by a map of Canada focusing on Calgary and displaying the following data.]

• 26.9% (2004)
• 25.5% (2019)
• 34.5% (2023)

For example, buying and maintaining an average-priced home in Calgary would cost about one-third of the typical monthly income in the area in 2023, up from 25.5% in 2019 and 26.9% in 2004.

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[Visual: Animated transition to the on-screen title "Homebuying Downpayment in Ottawa", accompanied by a map of Canada focusing on Ottawa and displaying the following data.]

2023 double the typical yearly income

Pre-COVID 1/5^th of typical yearly income

In Ottawa, the minimum down payment adjusted for interest rate and borrowing capacity needed to buy an average-priced home is almost twice the typical yearly income in the area. Before the pandemic, the minimum down payment needed to buy an average-priced home was about one-fifth of the typical yearly income in Ottawa.

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[Visual: Animated transition to a bird's-eye view of Vancouver, followed by a distant view of Toronto at sunset, overlooking a large body of water.]

In Toronto and Vancouver, the minimum down payment adjusted for interest rate and borrowing capacity is now over 4 times the typical yearly income. Not only does it take longer to save for a down payment, homebuyers with a 20% down payment have less homes to choose from.

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[Visual: Animated transition to the on-screen title "Homebuying Choice in Ottawa", accompanied by a map of Ottawa and an animation of house icons in decreasing numbers. The following data points are displayed on the side of the map.]

• 86.9% (2004)
• 71.5% (2019)
• 26% (2023)

In Ottawa last year, only about one-quarter of homes for sale were attainable for people earning Ottawa's median income. That's down significantly from 2019, when 71.5% of homes for sale were attainable on a typical Ottawa income.

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[Visual: Animated transition to a succession of bird's-eye views of Toronto and Vancouver.]

In Toronto and Vancouver, only around 1 in 7 homes for sale are attainable for people earning the median income in those cities, compared to 1 in 3, back in 2019.

These worsening trends in affordability or homebuyers and renters were seen in all of Canada's major cities.

0:02:43

[Visual: Animated transition to the on-screen title "Key Affordability Insights". Animated transition to Joelle Hamilton speaking to the camera.]

JOELLE HAMILTON: Now, let's break down some key insights from the data on housing affordability, particularly how the pandemic affected both renters and homeowners.

0:02:53

[Visual: Animated transition to the on-screen title "Housing mostly affordable in 2019". Animated transition to Mathieu Laberge speaking to the camera.]

MATHIEU LABERGE: The data tells us four important things. First, housing in Canada was relatively affordable in 2019, but the pandemic really changed that. Many affordability indicators worsened, with sharp increases in housing costs during the COVID period.

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[Visual: Animated transition to the on-screen title "Structural homebuying challenges in Toronto and Vancouver".]

Second, Toronto and Vancouver stand out in terms of homebuying affordability challenges.

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[Visual: Animated transition to a succession of bird's-eye views of Toronto and Vancouver. Direct cut back to Mathieu Laberge speaking to the camera.]

The issues in these cities are structural in nature and have been present for years, dating as far back as 2004. Families in these cities have struggled with high housing costs for many years, and fixing the problem might need bigger changes than in other parts of the country.

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[Visual: Animated transition to the on-screen title "Rising rental pressures across Canada".]

Third, we may not have yet seen the full extent of affordability challenges in the rental market.

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[Visual: Animated transition to views of a father putting his young child to sleep and of a couple moving into a house.]

Rising home prices have pushed more Canadians to stay in the rental market, putting additional pressure on rent prices.

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[Visual: Animated transition to the on-screen title "Inflation's impact on renters' purchasing power".]

Finally, inflation has hit renters especially hard.

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[Visual: Animated transition to views of a person placing a grocery article in their basket, of nighttime traffic on a city street, of a woman browsing skirts and of the fruit and vegetable section of a supermarket.]

During the pandemic, non-housing costs like food, transportation, and clothing have surged, reducing renters' ability to manage rising housing costs.

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[Visual: Animated transition to the on-screen title "Setting the Right Affordability Benchmark". Animated transition to Joelle Hamilton speaking to the camera.]

JOELLE HAMILTON: With affordability challenges on the rise, setting the right target is crucial. Let's hear why restoring early-2000s affordability levels may no longer be realistic.

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[Visual: Animated transition to Mathieu Laberge speaking to the camera.]

MATHIEU LABERGE: Given the scale of market changes, aiming for early-2000s affordability is no longer feasible. The housing landscape has shifted too much since then.

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[Visual: Direct cut to an exterior view of a house and a family moving in, followed by members of different families enjoying daily life.]

Instead, our focus should be on returning to pre-pandemic affordability levels, specifically those of 2019. Restoring these levels is more achievable than trying to reach early-2000s affordability benchmarks. This goal is more realistic and would provide much-needed relief to Canadian families.

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[Visual: Direct cut to two views of parents enjoying strolls with their children.]

JOELLE HAMILTON: As we've seen, housing affordability has become a significant challenge for Canadians, but understanding the data helps us find realistic solutions.

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[Visual: Direct cut back to Joelle Hamilton speaking to the camera.]

By setting 2019 as our benchmark, we can aim to improve affordability sooner.

0:04:56

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