In simple terms, a housing crisis is a market situation in which affordable housing becomes significantly in short supply. Often also referred to as a “housing bubble”, events like these typically revolve around overvalued homes and residents struggling to become homeowners. Catalyzed by the conditions of the pandemic, perplexingly high prices and aggressive price appreciation has gone from an issue plaguing just the areas around Vancouver and Toronto, to a national emergency. The national average home price has risen over 30% in a two-year period between July 2019 and July 2021, to a figure of $662,000 as of July 2021 (Alini, 2021). This is down from $716,828 which was reported in March 2021 hinting at a slight slowdown from an unsustainable all-time high.

However, it’s a threat to the many young Canadians wanting to buy into the market (Hughes, 2021). Additionally, concerns about affordability and quality of rental options have crossed from being an issue primarily for low-income Canadian to middle-class, with an increasingly large number of prospective homebuyers seemingly being barred out of homeownership by the towering prices (Alini, 2021). This is not a new issue; in fact compared to the rest of the G7 countries, Canada has had the longest housing price expansion, with the last correction occurring over 24 years ago as stated previously (shown below). A price correction is characterized by national prices dropping by at least 10% , and should technically come to be once in a while, similar to a business cycle. Its absence here is leading to an increasingly inefficient market which points to a positive feedback loop which drives home prices to unstable levels – pure joy for homeowners, but a nightmare for those trying to buy (Punwasi, 2021).


While there’s no unified or straightforward explanation for how Canada’s housing crisis came to be this bad, there are certain risk factors that have accumulated over the years which offer some clues. Firstly, economists blame low mortgage rates, as they allow people to take large mortgages that enable them to afford pricier homes. Since the 1990’s, Canadian mortgage rates have veered away from double-digits towards the lower single-digits, allowing for lots of real estate movement. As of September 2020, Canada’s collective mortgage debt hit $1.7 Trillion which is up by $700 Billion from the same month in the previous year. The onset of the pandemic has lowered borrowing costs even further, as the Bank of Canada employed a variety of stimulus measures to boost economic activity and cushion the impact of COVID-19.

Economists and analysts alike believe that even a slight increase in interest rates would scare away financing homebuyers and help tame the growing prices of the housing market. Mortgage rates play on the demand-side of the problem, as when rates are low, people flock to buy houses and conversely when they’re high, the market slows down. The second main culprit is a short supply of homes. Analysts believe that Canada isn’t building enough homes to keep up with the demand of everyone who wishes to either rent or purchase one. With factors like immigration and international education fuelling the population growth within the nation at staggering levels, it seems as though the housing supply hasn’t been rising fast enough. A look at the number of houses built between 2016 and 2021 compared to the increase in population depicts just this, with only about 270,000 houses being built in contrast to 780,000 new people in the Greater Golden Horseshoe region. Finally, the use of homes as investments is an additional factor in skyrocketing house prices. Owning and renting properties outside of a main place of residence has been a fairly common source of passive income for many Canadians. Real estate has been a very attractive investment opportunity in recent times due to rising prices and has appealed to outsiders as well, with many overseas investors growing their money in Canadian housing. In fact, 20% of property purchases in early 2021 were made by investors with similar statistics in the years prior. While a fruitful investment opportunity, problems arise when investors leave these properties vacant or turn them into short-term rentals as this slashes the supply of available housing for Canadians to reside in (Alini, 2021).


In the recent past, the Federal government  has tried to put in effort and measures to ease the housing crisis, yet it doesn’t seem to be resolving fast enough. Trudeau’s Liberal government has imposed a handful of measures meant to bring down soaring prices, all of which have focused on the supply-side of the issue. Spending $20 billion for a 10-year social infrastructure investment program focusing on building affordable housing and senior homes, $125 million a year in tax incentives for renovating and building rentals, as well as the 2019 First-Time Home Buyer Incentive are among some of the ideas brought forth by the Liberals (Hughes, 2021). While these all sound like great ideas and have potential in softening the housing problem, the ever-growing crisis shows that there is still a long way to go. Moreover, housing supply statistics suggest that supply may not be the issue in the first place. Canada has not built this much housing since the mid-1970’s, hitting an impressive average of 200,000 units over the past 6 months. This proposes that the issue might be in the demand rather than supply; as previously mentioned, Canada has been nothing but pumping the demand for housing with things such as stimulus and buyer assistance (Wong, 2021).


With September’s federal election around the corner, many eyes are on leaders’ policies regarding the housing situation. Many Canadians believe the right leadership in Ottawa is required to salvage the affordability in the country. Luckily, all major parties agree on three things: there is a housing crisis, it’s happening right now, and something needs to be done about it. Policy proposals vary between runners, but remain along the lines of increasing supply while trying to put a damper on demand. Liberal leader Justin Trudeau pledged to build/renovate 1.4 million homes within 4 years; Conservative Leader Erin O’Toole pledged 1 million new houses in 3 years; NDP leader Jagmeet Singh pledged 500,000 new affordable homes in 10 years (Boisvert, 2021).

O’Toole firmly believes that the issue is gravely in the supply, in that it is not keeping up with the growing Canadian population. His supply-increasing campaign aims to not just keep up with demand, but to get ahead of it. In addition, the Conservatives want to release at least 15% of 37,000 federal buildings to be converted into residential homes and rentals (Haider, 2021). A common proposal between the Conservative and Liberal Parties is to ban foreign investors for a period of time, while the NDP and Green Party wish to simply increase regulation of these foreign investors. 


From the looks of it, the Canadian real estate industry will either continue steadily rising, or serve as an overinflated bubble waiting to burst and send prices falling. But before Canada can get anywhere with the crisis, it should dwell on one fundamental question: are the rising prices a good thing or a bad thing? As difficult as the scarcity of affordable housing is for young prospective homebuyers, there are many people benefitting from the bullish market conditions and both the pros and cons should ideally be taken into consideration (Boisvert, 2021). It can also be assumed that the bubble can be burst through policies and the right ideas coming out of Ottawa following the upcoming election. These policies should focus on the increase of housing supply and an increase on regulations and taxations on real estate investors. Until a solution is reached, Canada will continue making history with one of the most spectacular real estate journeys in the world (Boisvert, 2021).


Alini, E. (2021, August 24). Cheap money, Shortages, investors and crime: The making of Canada’s housing crisis – National. Global News.   

Haider, M., & Moranis, S. (2021, August 23). How the Conservatives plan to tame Canada’s housing dragon. Financial Post. 

Boisvert, N. (2021, August 20). Main federal parties all say they’ll make housing more Affordable. Here’s what we know about their Plans | CBC News. CBC News. 

Hughes, S. (2021, August 20). How federal parties plan to FIX housing crisis after years of failed policies. financialpost.

​​Punwasi, S. (2021, August 6). The Canadian property bubble has grown for 24 years, longer than any OTHER G7. Better Dwelling. 

Wong, D. (2021, August 18). Canadian real estate needs more focus On Demand-side ISSUES: BMO. Better Dwelling.