In the various provincial and municipal elections across the country, over the past year or so, affordable housing has become a top campaign issue. Affordability has been a growing concern since the last federal election and it promises to be front-and-centre again in the next one, which is set for about a year from now.
Taxation and regulation efforts by all three levels of government seem to provide only temporary relief, especially in the country’s biggest and hottest markets. The latest affordability report from one of Canada’s big banks makes that clear. So there is reason for concern.
The report indicates housing affordability in Canada is at its worst level in nearly 30 years. On aggregate, Canadians living in a typical bungalow are spending 54% of their pre-tax income to cover their housing costs, including the mortgage, taxes and utilities. That’s up from about 43% just three years ago, an increase of almost 25%.
The report points to rising interest rates as chief cause of the decrease in affordability. Rising rates and the B-20 mortgage rules have combined to keep first time buyers out of the market. But people who have already made the investment – those who paid the high price for a home based on purchasing power that rested on rock-bottom rates – could be facing some ominous prospects when it comes time to renew or refinance.
Higher mortgage costs, tougher qualification rules and stagnating incomes are likely to present a triple-threat that will feed affordability worries for the foreseeable future.