Bank outlines 7-step solution to address supply and cost challenges
The housing affordability crisis in Canada is reaching alarming new heights, impacting middle-income families far beyond major cities, according to a new report from the Royal Bank of Canada (RBC).
"Too many Canadians are struggling to find a home they can afford—making housing a defining issue of this country's politics and economics," the report stated.
The crisis is "creating intense inter-generational tensions" and will only get worse if more action isn't taken soon, RBC warned. The bank estimates that over 1 million of the 1.9 million new households expected by 2030 will not be able to afford to buy a home.
"That's equivalent to almost all the households in Atlantic Canada right now," the report noted.
The affordability crunch has implications far beyond just home ownership. RBC said housing affordability is "cutting through to government policies on immigration and education and impacting Canada's reputation and ability to attract talent and investment."
The percentage of Canadian households that can afford a home has plummeted in recent years, from 61% for condos and 49% for single-detached homes two decades ago to just 45% and 26%, respectively, at today's prices and interest rates.
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Recent government policies aimed at curbing housing demand, such as caps on international students and temporary foreign workers, are unlikely to be sufficient.
“Signs that the housing market is heating up again in anticipation of interest rate cuts by the Bank of Canada only highlight why faster action is necessary,” the bank said.
RBC's 7 recommendations
To address the crisis, RBC outlined seven key recommendations:
- Expand the construction workforce: Canada needs over 500,000 additional construction workers to meet housing demand.
- Innovate in construction: New designs, techniques, and technologies are needed to increase productivity and lower building costs.
- Speed up approvals: Reduce the time and expense involved in the project approval process
- Ease zoning restrictions: Increase housing density by allowing multiple units on single residential lots.
- Reduce building costs: Focus on lowering costs across materials, labor, government charges, and land.
- Shift housing mix: Build more rental housing to meet the surge in demand due to affordability challenges.
- Unlock existing housing capacity: Find ways to add units within current structures and properties to quickly address the shortage.
It’s not an easy fix,” RBC said. “Improving Canadian’s quality of life will depend on bringing significant home and rent price relief.”
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