Commentary
By Jake Fuss and Austin Thompson

In a recent media scrum, the Carney government’s new federal housing minister, Gregor Robertson—former mayor of Vancouver—was asked: “Should home prices go down?” His response: “No, I think that we need to deliver more supplies, make sure the market is stable. We need to be delivering more affordable housing.”

Robertson’s response raises a follow-up question: What does the Carney government mean when it promises “affordable housing”?

Rising house prices are nothing new. The sticker price for the average Canadian home has increased in most years, barring periods such as the 2008–09 Global Financial Crisis. And house prices aren’t expected to fall anytime soon; forecasts point to continued house price growth. But for homebuyers, the key issue isn’t that prices are increasing; it's whether they’re rising faster than incomes. By that measure, housing in Canada has become much less affordable in recent years.

Consider Minister Robertson’s tenure as Vancouver mayor from 2008 to 2018. During that time, the price of a typical single- or semi-detached Vancouver home grew from $690,000 to $1,980,000—a 187 per cent increase. Meanwhile, the after-tax income of a typical Vancouver family rose by just 15 per cent. Today, the typical single- or semi-detached home in Vancouver costs $ 2.38 million. Vancouver’s housing market is somewhat unique, but strong price increases reflect a broader national trend: home prices have risen dramatically even as income growth has stagnated, largely because housing demand, driven by immigration-fuelled population growth, continues to exceed new housing construction far.

Which takes us back to the question of “affordability.” Housing can become more “affordable” even as home prices rise, so long as the after-tax incomes of Canadians grow even faster. This has happened before—after-tax wage growth exceeded house price increases in the late 1980s, for example. Unfortunately, this seems unlikely to happen in the 2020s.

While house prices have soared, wage growth in Canada has stagnated. Consequently, in 2022 (the latest year of available comparable data), the typical worker in Alberta—Canada’s highest-wage province—earned less than the typical worker in low-wage U.S. states such as Mississippi and West Virginia. From 2014 to 2024, Canada’s GDP per person, an indicator of incomes and living standards, grew by a mere 2.0 percent compared to 19.6 percent in the United States.

In a recent analysis, economist Mike Moffatt estimated that, if Canadian wages grow at the average rate seen over the past two decades—and if home prices remain stable—it would still take 20 years for Canada to achieve housing affordability levels of 2005. And of course, much could go wrong—if wage-growth estimates fall short, mortgage rates rise, or house prices rise, then that slow march towards housing affordability may never end for many Canadians, including young people looking to start a family.

In other words, reality remains at odds with the Carney government’s ambitious rhetoric about delivering so-called “affordable homes.”

Again, the government wants to double the rate of homebuilding in Canada in a decade. Is that possible? Currently, Canada lacks the required savings and investment to fund that level of building. And due to tepid growth of our construction workforce, we currently do not have the manpower to build twice as many homes. And as always, local opposition to rapid housing development in certain neighbourhoods and public lands may also prove hard to overcome.

But even if somehow Canada was able to marshal the resources and political capital required for such a feat, according to Minister Robertson, the end result would only be to “make sure the market is stable.” Stable, based on today’s prices, means unaffordable for many Canadians unless incomes rise. Clearly, housing supply is only half the battle. To achieve housing affordability on any reasonable timeline, the government must not only help facilitate a major expansion in homebuilding but also substantial growth in Canadian incomes—something the Trudeau government failed to do.

The key is investment, which is required to expand the housing supply, grow Canada's economy and boost wages. In a capital-scarce economy such as Canada’s, these goals may compete with one another. So governments in Canada, including the Carney government, must adopt policies that attract investment, such as streamlining regulation and reforming capital gains taxes. And crucially, rising incomes will only translate into improved affordability if Canadians can keep more of what they earn, which will be difficult given that anticipated increases in federal spending will ultimately result in a higher tax burden. Ottawa must also craft immigration and residency policies so population growth doesn’t continue to overwhelm the housing supply and further increase prices.

Canadians should think about housing affordability not just in terms of housing supply but as part of a broader economic challenge—one that also depends on growing the economy, increasing savings and investment, and limiting how much governments take in taxes. Only a comprehensive strategy, centred on broad-based growth, will make the dream of homeownership a reality for generations of Canadians.

Jake Fuss is Director of Fiscal Studies for the Fraser Institute. Austin Thompson is a Senior Policy Analyst with the Fraser Institute’s Centre for Municipal Studies.