Amid ongoing debates in parliament regarding housing affordability, Ottawa’s financial watchdog has released a report indicating substantial advancements in narrowing the affordability gap on a national scale, although the scenario varies regionally.
Interim Parliamentary Budget Officer (PBO) Jason Jacques published an updated housing report, evaluating affordability by comparing average home prices to what the average household can afford. According to the report, the affordability gap decreased from 80% in September 2023 to 34% in August.
The PBO attributed this improvement to lower borrowing costs, increased wages, and reduced home prices, making homeownership and mortgage payments more manageable for Canadians. While home prices surged in 2022 during the post-pandemic recovery phase, they subsequently stabilized in many markets after the Bank of Canada raised its benchmark interest rate above five percent.
Presently, with the policy rate at 2.5% post several cuts, mortgage expenses have decreased, although home prices have not rebounded to previous peaks. The PBO highlighted that Canada’s priciest markets witnessed the most significant gains in affordability over the past three years, particularly in Toronto and Hamilton, albeit home prices in these areas still exceed affordable levels.
The report revealed that Halifax faces the widest affordability gap at 74%, while Edmonton boasts the smallest gap at four percent among major metropolitan areas analyzed. Calgary, Montreal, and Quebec City experienced decreased affordability, but the PBO noted that mortgage costs in these cities remain relatively low.
Additionally, the report assessed households’ financial stability based on mortgage debt service ratios, indicating a notable progress in restoring housing affordability to 2019 levels in the first half of 2025. While Toronto, Vancouver, and Victoria saw improvements in these ratios, the PBO cautioned that households in these expensive markets are more financially fragile compared to those elsewhere in the country.