Can Canada's Housing Crisis Be Solved? An Explainer

Executive Summary: Canada is in the midst of a multifaceted housing crisis that has evolved from a challenge for low-income households into a systemic threat to the economic and social well-being of the middle class. At its core, the crisis is a structural imbalance between insufficient housing supply and surging demand. The analysis concludes that Canada’s housing crisis is, in principle, solvable. However, its resolution is contingent upon the implementation of a coordinated, aggressive, and sustained multi-pronged strategy that simultaneously addresses supply constraints, moderates demand pressures, and dramatically expands non-market housing options. No single policy lever will suffice. The crisis was created by decades of policy choices; it can be undone by a new, more courageous set of choices.

The Anatomy of a National Crisis

The Canadian housing crisis is fundamentally a structural mismatch between housing supply and demand. The central diagnosis points to a chronic undersupply of housing colliding with a period of unprecedented demand. An analysis by the Macdonald-Laurier Institute shows a surge in population, driven largely by federal immigration policy, overwhelmed the market’s capacity to build new homes. This was exacerbated by supply chain disruptions and a rise in interest rates, creating what CIBC has termed a “perfect storm.”

Measuring Unaffordability

The scale of the crisis is starkly illustrated by several key metrics:

The 30% Affordability Rule: By 2022, Statistics Canada data showed that more than one in five Canadian households (22%) were living in unaffordable housing by this measure.
Price-to-Income Ratios: In major markets like Toronto and Vancouver, the ratio of homeownership costs to income has soared, with some analyses suggesting it would take a median-income household over 25 years of their full income to afford an average home.
The Rental Crisis: The national rental vacancy rate plummeted to a historic low of 1.5% in 2023, far below the 3% rate considered to be a balanced market.

Part I: The Supply-Side Imperative: Building Our Way Out

The consensus among a wide spectrum of analysts is that Canada has a severe housing supply deficit. The core of any credible strategy must therefore involve a massive and sustained increase in the construction of new homes.

The Scale of the Challenge

The Canada Mortgage and Housing Corporation (CMHC) has established an ambitious target: to restore housing affordability, Canada would need to build an additional 3.5 million homes by 2030, over and above the usual pace of construction (CMHC report on the housing supply gap). However, even achieving this Herculean task would not be a panacea. A Fraser Institute analysis of CMHC’s own modelling concluded that such a construction bonanza would still see average home prices rise significantly.

Unlocking the Land: Zoning Reform

A primary impediment to supply is restrictive “exclusionary zoning” that permits only single-detached homes in most residential areas. The solution gaining traction is to legalize “Missing Middle” housing—duplexes, triplexes, townhouses, and small apartments. The federal government is now tying billions in funding to municipal commitments to end single-family zoning. Cities like Toronto, Vancouver, and Calgary are now implementing these reforms.

Accelerating the Build: Slashing Red Tape

Canada has some of the longest project approval timelines in the developed world. Reforms proposed by groups like Build Canada focus on creating independent Housing Growth Ombudsmen, standardizing building codes, and creating catalogues of pre-approved designs to cut approval times.

The Productivity Puzzle & Labour Chasm

Canada’s ability to build is hampered by low productivity in the construction sector and a severe labour shortage. Projections show a need for over 500,000 additional construction workers in the next decade (RBC Economics report on construction labour). Solutions involve embracing innovation like modular and factory-built homes, prioritizing immigrants with construction skills, and aggressively funding skilled trades training programs.

Part II: Calibrating Demand: Policies to Cool the Market

A comprehensive strategy must also include measures to moderate superheated demand, particularly from speculative and non-resident sources.

Aligning Immigration and Housing: A consensus exists among many economists that the recent, rapid increase in population overwhelmed the housing supply. The federal government has recently moved to moderate immigration targets, explicitly citing the need to ease pressure on housing.
Taxation Tools: To curb non-productive investment, governments have deployed foreign buyer taxes, as well as vacancy and underused housing taxes. Vancouver’s Empty Homes Tax, for example, has been highly effective, helping to decrease vacant properties and generating millions for affordable housing initiatives.
Regulating Short-Term Rentals: Provinces like British Columbia and municipalities like Toronto have implemented stringent regulations to return thousands of short-term rental units to the long-term market.

Part III: Beyond the Market: The Role of Social and Non-Profit Housing

The private market alone will never provide adequate housing for all. A robust non-market sector—comprising social, community, and co-operative housing—is essential. Canada lags its peers, with social housing making up only 3.5% of its housing stock, half the OECD average.

The primary vehicle for federal investment is the National Housing Strategy (NHS), a multi-billion dollar plan aimed at creating and repairing affordable units (Official Government of Canada National Housing Strategy progress page). A key component is the renewed investment in co-operative housing. A new $1.5 billion Co-operative Housing Development Program, co-designed with the Co-operative Housing Federation of Canada, aims to build thousands of new permanently affordable co-op homes.

Conclusion: A Coordinated Strategy for a Solvable Crisis

There is no single solution to Canada’s housing crisis. The evidence points to an “all-of-the-above” strategy that is implemented with aggression and coordination. The technical pathways are clear. The true challenge is political: it requires a level of will, cooperation, and long-term commitment that has, for a generation, been absent. The crisis is solvable, but its resolution depends entirely on whether Canadian society and its leaders are finally prepared to undertake the great and necessary work of rebuilding a housing system that works for everyone.