In the ongoing debate among lawmakers on enhancing housing affordability, Ottawa’s fiscal watchdog has revealed significant strides in bridging the affordability divide nationwide, with varying scenarios observed across different regions.
Interim Parliamentary Budget Officer (PBO) Jason Jacques recently published an updated housing report assessing affordability by analyzing the disparity between average home prices and the purchasing power of the average household. According to the report, this affordability gap decreased from 80 percent in September 2023 to 34 percent in August.
The PBO attributed this positive trend to reduced borrowing costs, increased wages, and decreased home prices, which have collectively eased the burden for Canadians in acquiring homes and meeting mortgage obligations. Although housing prices surged in 2022 during the post-pandemic recovery period, they subsequently stabilized in several markets following the Bank of Canada’s rapid hike of the benchmark interest rate to over five percent. The current policy rate now stands at 2.5 percent after a series of cuts, contributing to reduced mortgage expenses, while home prices have not rebounded to their previous peaks.
The PBO highlighted that Canada’s priciest real estate markets showed the most notable improvements in affordability over the last three years, with significant advancements seen in Toronto and Hamilton. However, despite the progress, home prices in these regions remain considerably higher than affordable levels.
According to the report, Halifax records the widest affordability gap at 74 percent, while Edmonton boasts the smallest gap among major metropolitan areas analyzed, standing at four percent. Calgary, Montreal, and Quebec City experienced the most significant declines in affordability, yet the PBO noted that mortgage carrying costs in these cities remain relatively manageable.
The report also examined households’ financial stability based on mortgage debt service ratios, indicating a substantial restoration of housing affordability to 2019 levels in the first half of 2025. While Toronto, Vancouver, and Victoria have shown improved ratios, the PBO cautioned that households in these still-expensive markets face heightened financial vulnerability compared to other regions in Canada.