Why aiming to achieve pre-COVID housing affordability levels makes sense

Canada's housing markets have undergone significant change since 2020. That's why it makes sense to aim to regain the levels of housing affordability we had pre-pandemic.

In this article, we will provide the rationale as to why targeting pre-pandemic affordability seems realistic.

We will also explore why Toronto and Vancouver will need more extensive solutions, and likely more time, to regain affordability status, given the more structural and long-standing issues impacting both markets.

Housing affordability challenges: long-standing in Toronto and Vancouver, much more recent elsewhere

New data and analysis by CMHC provide more detail as to how renters, homeowners and homebuyers have fared through the current affordability crisis.

The tables below show the performance of different affordability indicators for renters, homeowners, and homebuyers across major cities in the country.

They also show how these indicators performed in milestone years relative to their historical values. Grey denotes a value that is within historical values, while different shades of green and red give a sense of the intensity of the deviation from historical values.

These tables paint a much clearer picture than broad-stroke national analyses that combine several markets and user types.

Key insights:

1. Housing was mostly affordable in Canada in 2019, then COVID hit.
   • Although many affordability indicators deteriorated between 2004 and 2023, the deterioration was most substantial during the COVID period.
   • Notably, the vast majority of homebuying and homeownership affordability indicators across all urban centres showed a clear deterioration between 2019 and 2023.
   • During COVID, labour mobility contributed to this deterioration across the country's largest urban centres, especially with many households looking to buy a home outside of these cities.
2. Toronto and Vancouver stand out in terms of homebuying affordability challenges, which seem to be structural.
   • For homebuyers, there were generally no housing affordability changes between 2004 and 2019, except in Toronto and Vancouver where we have observed signs of affordability challenges, starting as early as 2004.
   • These markets have faced harsh financial conditions for several years, and solutions may require deeper changes than elsewhere in the country.
3. We may not have yet seen the full extent of rental market affordability challenges. 
   • Not as many rental market indicators deviate from their historical values as those of the homeowners and homebuyers.
   • This is still a cause for concern in the rental market. More expensive homebuying means more Canadians are remaining renters for longer, putting additional pressure on the rental market.
4. Inflation hit renters hard.
   • Post-COVID, non-shelter costs spiked, and limited renters' purchasing power, including their capacity to cope with higher housing costs.
   • As shown in our Rental Market Report, this may also have limited their ability to move due to elevated asking rents.
   • This immobility also applies to homeowners, but renters tend to have lower incomes and less flexibility to face increases in the cost of goods and services than homeowners.

Incremental progress goes a long way

Two broad conclusions can be drawn from this analysis.

First, focusing on fixing the more recent and less entrenched situation and directing efforts to getting back to pre-COVID housing affordability across the country may not fix every challenge, but it would bring relief to many Canadian families. As such, using a pre-pandemic year as our affordability benchmark makes sense.

Second, the first step in resolving a crisis is being transparent about what is possible and when. The affordability situation in Toronto and Vancouver is very different from other parts of the country where affordability challenges emerged during the pandemic period.

Solutions to the affordability crisis in both cities may require deeper structural changes compared to other cities and will take longer to resolve.