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There is currently a vicious crisis concerning affordable housing in Canada. While experts say we shouldn’t spend more than 30% of our income on housing, there are millions of struggling Canadians spending more than 30% of their income on housing costs. What makes this issue even worse is that its effect doesn’t end at housing. For those who live off minimum wage, it becomes almost impossible to maintain their budgets as so much of their income is going toward rent. This can lead to high levels of consumer debt, poor credit, and even homelessness. How and why has the housing market become, and continues to be, so unaffordable?

What Is Affordable Housing In Canada?

The word affordable has changed drastically over the years. Today, an “affordable” house in the Greater Toronto area costs on average around $1,025,200 according to the CREA National Price Map. As mentioned above, according to the Canadian Mortgage and Housing Corporation (CMHC), housing is considered “affordable” if it costs less than 30% of your income

Unfortunately, for some people, this isn’t enough to keep their current home, let alone buy a new one. Looking closely at Statistics Canada’s numbers, it appears that this housing crisis is more severe in small, suburban areas and cities. According to The Globe and Mail, in British Columbia, 31% of renters in West Vancouver spend more than half their income on housing, compared with 25% in the City of Vancouver itself. The cost of homes and rental apartments in residential areas is skyrocketing, causing people to leave their homes in search of

The Most Unaffordable Cities In North America

According to a 2021 report by Oxford Economics, five Canadian cities are ranked among the ten least affordable cities in North America. 

Housing Affordability

When cities like Hamilton Ontario, a suburb of Toronto, are more unaffordable to live in than major U.S. cities like Los Angeles, New York City, and Miami, it’s not hard to understand why young Canadians with average to low incomes are putting their dreams of homeownership on the back burner.

Most Expensive Canadian Cities To Live in 2020

CityHome Price (2020)Household Income (2020)% of Income For Mortgage (2020)
Burnaby, BC1,048,500100,40844.7%
Richmond, BC1,099,311107,02444.0%
Oakville, ON1,027,355100,40843.8%
Vancouver, BC1,027,355105,85041.6%
Kelowna, BC957,100100,40840.8%
Langley, BC950,700100,40840.5%
Coquitlam, BC902,337100,40838.5%
Saanich, BC868,100100,40837.0%
Richmond Hill, BC907,867107,02436.3%
Ajax, ON851,718100,40836.3%
Mississauga, ON881,348107,02435.3%
Markham, ON871,818107,02434.9%
Vaughan, ON871,818107,02434.9%
Brampton, ON865,467107,02434.6%
Whitby, ON836,050107,13133.4%
Surrey, ON865,467115,13432.2%

Information taken from Mortgage Affordability Study conducted by Point2. Please check out their report for more information.

The Vicious Circle Of Unaffordable Housing

Advocates state that the steeply rising cost of rent is a result of the lack of low-cost rentals supplied in the main cities. The majority of rentals in the cities are overpriced and privately owned by money-hungry investors. This has forced low-income workers out of the cities and away from their jobs, to look for more affordable housing in rural areas.

With the influx of people moving from the cities to more rural areas, housing prices also increase in these places. This then creates another issue as the people who leave the cities trying to escape the high cost of living are faced with prices just as expensive. The high prices in these communities then spread and affect the residents living in nearby, underprivileged regions, who now must also deal with price increases.

Check out if you should rent or buy a home.

The Canadian Real Estate Boom

Another reason behind the affordable housing problem in Canada is the recent real estate boom. An intense growth in major cities, followed by the increase in demand for real estate, has a direct link to prices. As demand increases, so does the price. Additionally, people from other countries looking to either move to Canada or invest in property have caused this problem to worsen. Foreign investment in the real estate market has caused an increase in prices and the expected increase in immigration over the next few years will, without a doubt, escalate the demand for rental units.

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From Home To Vacation Destination

It’s no secret that Canada is home to dozens of picturesque locations that make for great vacation destinations for both Canadians and tourists from all over the world. And while this is great for the Canadian tourist industry, for those families who have lived in these places for years, the financial burden is only getting worse. With popularity comes an increase in the cost of living.

Is there ever a right time to buy a house?

Why Are Canadian House Prices Soaring In 2021?

The COVID-19 pandemic has impacted the economy in more ways than one. One of the most unprecedented effects it had is on the current red hot housing market. While initially housing prices and sales decreased during the first half of the pandemic, total sales outdid total listings during the rest of 2020.

According to the Housing Market Outlook report by the CMHC, the historic low mortgage rates and higher savings had created an opportunity for many Canadians to fund a home. The limited supply and a spike in demand lead to an inflation in housing prices. A CBC article, also notes that the rise Canadian housing prices will keep trending depending on the:

  • The rollout of the vaccine
  • The opening of the borders for immigration
  • The economy’s recovery 

Learn how to better save for a mortgage down payment.

 Will The Housing Market Crash in 2021? 

According to RE/MAX; a reputable real estate company in Canada, it is unlikely that the housing market will crash in 2021. It explains that in 2017 when the Government of Canada implemented the foreign buyer tax and the mortgage stress test to cool the market, many Canadians put their house buying dreams on hold. Now 2020 comes along, interest rates drop and savings increase causing Canadians to jump into the housing market.  

Given this, the influx of real estate listings required to cause a housing market crash, is unlikely. In fact, RE/MAX believes that even if a flood of listings were to appear, there would be enough demand to balance the supply.

Learn how to apply for a mortgage outside Canada.

Future Outlook: Will Economic Conditions Return To Pre-Pandemic Levels?

According to the Housing Market Outlook report by the CMHC, the economy is expected to return to normal towards the end of 2023. That is, if the majority of Canadians are vaccinated by the end of 2021. Other economic variables such as immigration, higher consumer and business confidence levels, and the decline of disposable income as government support comes to an end and people return to work will all contribute to the economic condition returning to normal. This includes home prices as well as the home sales returning to pre-pandemic levels.

Check out what happens when you walk away from your offer on a house.

Bottom Line

As the price of houses continues to increase at startling rates, people are losing their homes and slowly losing their jobs. With a broken economy and ageing housing stocks, communities are in need of reasonable, inexpensive housing.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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