From the Fraser Institute

By Steven Globerman, Joel Emes and Austin Thompson

According to our new study, in 2023 (the latest year of comparable data), typical homes on the market were unaffordable for families earning the local median income in every major Canadian city

The dream of homeownership is alive, but not well. Nearly nine in ten young Canadians (aged 18-29) aspire to own a home—but share a similar worry about the current state of housing in Canada.

Of course, those worries are justified. According to our new study, in 2023 (the latest year of comparable data), typical homes on the market were unaffordable for families earning the local median income in every major Canadian city. It’s not just Vancouver and Toronto—housing affordability has eroded nationwide.

Aspiring homeowners face two distinct challenges—saving enough for a downpayment and keeping up with mortgage payments. Both have become harder in recent years.

For example, in 2014, across 36 of Canada’s largest cities, a 20 per cent downpayment for a typical home—detached house, townhouse, condo—cost the equivalent of 14.1 months (on average) of after-tax income for families earning the median income. By 2023, that figure had grown to 22.0 months—a 56 per cent increase. During the same period for those same families, a mortgage payment for a typical home increased (as a share of after-tax incomes) from 29.9 per cent to 56.6 per cent.

No major city has been spared. Between 2014 and 2023, the price of a typical home rose faster than the growth of median after-tax family income in 32 out of 36 of Canada’s largest cities. And in all 36 cities, the monthly mortgage payment on a typical home grew (again, as a share of median after-tax family income), reflecting rising house prices and higher mortgage rates.

While the housing affordability crisis is national in scope, the challenge differs between cities.

In 2023, a median-income-earning family in Fredericton, the most affordable large city for homeownership in Canada, had save the equivalent of 10.6 months of after-tax income ($56,240) for a 20 per cent downpayment on a typical home—and the monthly mortgage payment ($1,445) required 27.2 per cent of that family’s after-tax income. Meanwhile, a median-income-earning family in Vancouver, Canada’s least affordable city, had to spend the equivalent of 43.7 months of after-tax income ($235,520) for a 20 per cent downpayment on a typical home with a monthly mortgage ($6,052) that required 112.3 per cent of its after-tax income—a financial impossibility unless the family could rely on support from family or friends.

The financial barriers to homeownership are clearly greater in Vancouver. But, crucially, neither city is truly “affordable.” In Fredericton and Vancouver, as in every other major Canadian city, buying a typical home with the median income produces a debt burden beyond what’s advisable. Recent house price declines in cities such as Vancouver and Toronto have provided some relief, but homeownership remains far beyond the reach of many families—and a sharp slowdown in homebuilding threatens to limit further gains in affordability.

For families priced out of homeownership, renting doesn’t offer much relief, as rent affordability has also declined in nearly every city. In 2014, rental rates for the median-priced rental unit required 19.8 per cent of median after-tax family income, on average across major cities. By 2023, that figure had risen to 23.5 per cent. And in the least affordable cities for renters, Toronto and Vancouver, a median-priced rental required more than 30 per cent of median after-tax family income. That’s a heavy burden for Canada’s renters who typically earn less than homeowners. It’s also an added financial barrier to homeownership— many Canadian families rent for years before buying their first home, and higher rents make it harder to save for a downpayment.

In light of these realities, Canadians should ask—why have house prices and rental rates outpaced income growth?

Poor public policy has played a key role. Local regulations, lengthy municipal approval processes, and costly taxes and fees all combine to hinder housing development. And the federal government allowed a historic surge in immigration that greatly outpaced new home construction. It’s simple supply and demand—when more people chase a limited (and restricted) supply of homes, prices rise. Meanwhile, after-tax incomes aren’t keeping pace, as government policies that discourage investment and economic growth also discourage wage growth.

Canadians still want to own homes, but a decade of deteriorating affordability has made that a distant prospect for many families. Reversing the trend will require accelerated homebuilding, better-paced immigration and policies that grow wages while limiting tax bills for Canadians—changes governments routinely promise but rarely deliver.

Steven Globerman

Senior Fellow and Addington Chair in Measurement, Fraser Institute

Joel Emes

Senior Economist, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute

From the Fraser Institute

By Tegan Hill and Austin Thompson

According to Calgarians for Thoughtful Growth (CFTG)—an organization advocating against “blanket rezoning”— housing would be more affordable if the mayor and council restricted what homes can be built in Calgary and where. But that gets the economics backwards.

Blanket rezoning—a 2024 policy that allowed homebuilders to construct duplexes, townhomes and fourplexes in most neighbourhoods—allowed more homebuilding, giving Calgarians more choice, and put downward pressure on prices. Mayor Farkas and several councillors campaigned on repealing blanket rezoning and on December 15 council will debate a motion that could start that process. As Calgarians debate the city’s housing rules, residents should understand the trade-offs involved.

When CFTG claims that blanket rezoning does “nothing” for affordability, it ignores a large body of economic research showing the opposite.

New homes are only built when they can be sold to willing homebuyers for a profit. Restrictions that limit the range of styles and locations for new homes, or that lock denser housing behind a long, costly and uncertain municipal approval process, inevitably eliminate many of these opportunities. That means fewer new homes are built, which worsens housing scarcity and pushes up prices. This intuitive story is backed up by study after study. An analysis by Canada’s federal housing agency put it simply: “higher residential land use regulation seems to be associated with lower housing affordability.”

CFTG also claims that blanket rezoning merely encourages “speculation” (i.e. buying to sell in the short-term for profit) by investors. Any profitable housing market may invite some speculative activity. But homebuilders and investors can only survive financially if they make homes that families are willing to buy or rent. The many Calgary families who bought or rented a new home enabled by blanket rezoning did so because they felt it was their best available option given its price, amenities and location—not because they were pawns in some speculative game. Calgarians benefit when they are free to choose the type of home and neighbourhood that best suits their family, rather than being constrained by the political whims of city hall.

And CFTG’s claim that blanket rezoning harms municipal finances also warrants scrutiny. More specifically, CFTG suggests that developers do not pay for infrastructure upgrades in established neighbourhoods, but this is simply incorrect. The City of Calgary charges an “Established Area Levy” to cover the cost of water and wastewater upgrades spurred by redevelopment projects—raising $16.5 million in 2024 alone. Builders in the downtown area must pay the “Centre City Levy,” which funds several local services (and generated $2.5 million in 2024).

It’s true that municipal fees on homes in new communities are generally higher, but that reflects the reality that new communities require far more new pipes, roads and facilities than established neighbourhoods.

Redeveloping established areas of the city means more residents can make use of streets, transit and other city services already in place, which is often the most cost-effective way for a city to grow. The City of Calgary’s own analysis finds that redevelopment in established neighbourhoods saves billions of taxpayer dollars on capital and operating costs for city services compared to an alternative scenario where homebuilding is concentrated in new suburban communities.

An honest debate about blanket rezoning ought to acknowledge the advantages this system has in promoting housing choice, housing affordability and the sustainability of municipal finances.

Clearly, many Calgarians felt blanket rezoning was undesirable when they voted for mayoral and council candidates who promised to change Calgary’s zoning rules. However, Calgarians also voted for a mayor who promised that more homes would be built faster, and at affordable prices—something that will be harder to achieve if city hall imposes tighter restrictions on where and what types of homes can be built. This unavoidable tension should be at the heart of the debate.

CFTG is promoting a comforting fairy tale where Calgary can tighten restrictions on homebuilding without limiting supply or driving up prices. In reality, no zoning regime delivers everything at once—greater neighbourhood control inevitably comes at the expense of housing choice and affordability. Calgarians—including the mayor and council—need a clear understanding of the trade-offs.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute