While the tariff tussle is grabbing headlines, Canada's next PM will face another generational challenge on housing
Donald Trump’s trade war has become the defining issue of Canada’s federal election campaign, swallowing up all other talking points as voters grapple with the question of which party leader is best equipped to deal with the mercurial US president.
But Canadians will also go to the polls on April 28 facing the worst national housing crisis in living memory, one that will loom large in the to-do list of whoever forms government and assumes the mantle of prime minister after the election.
The tariff dispute may have dominated headlines, but the cost-of-living – including housing – remains a huge issue for Canadians going to vote, according to a Narrative Research poll in March.
The symptoms of that housing crisis are well documented. Scores of Canadians, especially younger generations, have found themselves frozen out of the housing market thanks to eyewatering home prices and the often-impossible task of stumping up enough money to cover a downpayment or afford a mortgage.
A chronic lack of supply, meanwhile, has left the country short millions of homes and trapped Canadians in a rental market where prices have spiked during the past decade.
Current prime minister Mark Carney and Conservative leader Pierre Poilievre, vying for first place in the polls, have proposed a range of policy solutions to boost home construction and ease affordability woes in the housing market.
But an uncomfortable conversation could be needed to unlock homeownership for many Canadians – and it’s one that federal leaders don’t seem willing to have, according to Alberta Central’s chief economist Charles St-Arnaud (pictured top).
He told Canadian Mortgage Professional that the issue was more complex than simply cutting red tape and turbocharging construction, common solutions proposed by politicians in Ottawa.
A conversation about affordability is welcome, St-Arnaud said. “But I don’t think politicians are very upfront in telling the average voter, homeowner or renter – the average population – what it means to restore affordability,” he explained.
Trade-related uncertainty is dampening business and consumer confidence in Canada, according to new reports from the Bank of Canada, with recession fears rising even before the latest round of US tariffs.https://t.co/9IS5jPkcy7
— Canadian Mortgage Professional Magazine (@CMPmagazine) April 8, 2025
Why the federal government’s mortgage rule changes could be missing the mark
The federal government has introduced new recent rules in a bid to make mortgage qualification easier, including expanded access to 30-year amortizations and a hike in the insured mortgage cap to $1.5 million.
But St-Arnaud said the awkward truth is that home prices are still far too high across most markets for those changes to make a significant impact in the long run.
“There’s two ways you can restore affordability: you can bring prices down – if we do it overnight in a place like Toronto, you need house prices to drop by about 50%,” he said. “In Canada as a whole, I think it’s probably 30-35%. I’m not sure homeowners are willing to see that happening so rapidly.
“Then on the flipside, if you leave home prices where they are now and you do it through income growth, in Toronto you need stagnating house prices and income to continue to grow at where it was in the five years pre-COVID, for the next 15-18 years.”
Even in that best-case scenario with unchanging home prices and steady wage growth, a 25-year-old would have to wait until they’re 40 to be able to afford a home by themselves. “I feel we’re not really upfront [about the reality that] someone will have a cost to an adjustment,” St-Arnaud said. “It’s not going to be pain-free.”
Speeding up homebuilding: Easier said than done?
A sluggish pace of homebuilding and excessive regulation are often pinpointed as key culprits for the national housing crisis. But while the Liberals, Conservatives and New Democratic Party (NDP) have all unveiled proposals to build more homes, St-Arnaud highlighted another problem to overcome: a need for a sizable boost in Canadian productivity.
“We’re one of the worst performers in terms of productivity of all the OECD [Organization for Economic Co-operation and Development] countries,” he said. “But our income is linked to our productivity growth.
“We need to have that discussion, too. Income needs to grow, but for that we have other issues with the economy. If we were to be more productive, that would also help affordability and income would be growing faster – and that would also help productivity at the same time. If you look at the overall picture, I’m not hearing enough of those discussions.”
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