The Canadian Housing Crisis by Sara Soomro

The Canadian Housing Crisis

By Sara Soomro | For Ms. Walling’s Blog Post | Posted on January 23rd 2023  

 

In the past few years, housing prices in Canada have drastically increased, making it difficult for the middle class to afford properties. Housing affordability is becoming a cause for concern among Canadians. Affordable housing is necessary for a country's citizens to thrive. Affordable housing prices can increase the quality of life as additional income can be spent on necessities such as quality food, clothing, dental and medical services. Unaffordable housing is an issue with consequences such as addiction and substance abuse. Housing needs must be met to prevent additional issues from compiling. All this said, what exactly is the housing crisis, what are its causes/effects and how can this obstacle be overcome?   

 

Buying new houses is out of reach for many people, though buying older houses is also very expensive; it shouldn't be. Even rent in Ontario for an average house (3 bed 2 bath) is about 2-3 thousand dollars a month. Families spend 85.2 and 95.8% of their income paying mortgage for their house in Toronto and Vancouver, respectively, if they are lucky enough to attain a contract in the first place. Spending that much on a quality roof over one's head is absurd; it leaves only 15% for other necessities such as medicine, food, activities, and clothing. 

One reason for this housing crisis is that there are many more buyers than the houses available in the market. The COVID-19 pandemic has also played a part in this. People felt more in need of a house, and workers became more in demand as one-million positions in the industry across Canada became vacant. 

The influx of buyers causes bidding wars on houses, making them sell for more than their asking price. Since 2010 housing prices in Canada have increased by 105%; as a comparison, in the United States, they have only risen by 47% over the same time. Canada has the second largest increase in housing prices over a range of developed countries, following New Zealand, which has a 111% growth rate. While buying a house, one must also be cognizant of interest rates and inflation; the increase in housing prices is an effect of inflation; higher inflation raises interest rates since lenders need to make up for the lost value, which is why interest rates have been skyrocketing recently. 

Unaffordable housing leads to homelessness. Studies show that homelessness can cause an individual to be more likely to fight addiction and substance abuse, from 19.0% at 0-2 months to 28.2% after six months of homelessness. 

How can the housing crisis be overcome? Firstly the increase in immigration will help with this issue, as Canada has an immigration target of 1.5 million over the next three years. Although this worries some as they anticipate a more competitive market, experts say this will aid the economy as immigrants fill in the worker shortage. Furthermore, immigrants tend not to have enough money saved up for a down payment and consistent mortgage payments. These fears are misguided as even when immigrants had significantly decreased in Canada during the pandemic, the demand for housing persisted, disproving the correlation.

On top of that, the National Housing Strategy Act, effective on January 1st, 2023, prevents non-Canadians from purchasing residential properties for two years to ensure an open market to former Canadians. Secondly, the Canadian government is not enough to tackle this problem and will need the interference of investments from numerous private companies. Canadians need the private sector to produce more housing so that the supply increases and demand decreases; it is too great a problem for the government alone to conquer. 

Essentially The government needs to open up immigration to new Canadians, and the private sector needs to ensure that enough housing supply is available. 

 

Overcoming this nationwide affordability issue will be challenging. Implementing these actions will increase Canada's chances of accommodating its citizens and fostering an accessible/affordable housing market.