Canada’s housing market at a standstill, impacting social services system-wide: study

Canada’s housing sector appears to be “stuck” and it’s not because the demand has disappeared, according to new data from Chartered Professional Accountants (CPA) Canada.

The study found that 55 per cent of homeowners in Canada plan to stay in their current homes for the foreseeable future, limiting turnover and supply across the country.

Meanwhile, 61 per cent of homeowners looking to move are sidelined, either waiting for prices to improve or facing financial constraints to sell.

“This suggests a housing market that is increasingly stuck, with many homeowners holding onto starter homes longer than expected,” says David-Alexandre Brassard, CPA Canada’s chief economist.

“Limited movement is reducing turnover and slowing overall market activity.”

“Housing isn’t really turning over to new households that need them,” said Carolyn Whitzman, an adjunct professor and senior housing researcher at the University of Toronto.

When the federal capital gains tax was introduced in 1972, primary residences were exempt on the assumption that homeowners would sell when they retired and use the money to fund a relatively short retirement, she said. 

Life expectancy was much lower then than it is today and communities lack affordable downsizing options, according to Whitzman.

As a result, older homeowners often remain in place for longer periods, reducing housing turnover and limiting supply for younger households.

“Canada should have responded to this a while ago,” said Whitzman.

“The population is aging, full stop. And we don’t have enough good alternatives for seniors.”

The CPA study points to a bottleneck system, where fewer affordable or middle-class homes available to purchase create more competition in the rental market and limited pathways for people moving through the system.

The stagnant market can affect non-profits and community organizations. 

A new report from the Maytree Foundation calls for a Canada-wide housing benefit to address the affordability crisis, arguing that supply alone will not meet the needs of low-income renters. 

The report recommends expanding income supports to help Canadians afford housing in the private market and reduce the possibility of eviction and homelessness.

Traditional programs are often tied to specific units, but Maytree says a “portable housing benefit” would allow people to access support wherever they live, offering faster and more flexible relief as rents continue to rise.

When future buyers stay in rental units longer, it reduces the availability for lower-income households, said Clement Nocos, director of policy and engagement at Broadbent Institute. 

“What affects buyers will affect renters and vice versa,” he said.

In turn, it can push people towards housing precarity, longer shelter stays, reliance on rental support and even homelessness.

“The knock-on effect here is that for the social sector, yes, I think housing needs to be thought of as a part of the social sector,” he said. 

“Housing policy in other countries is very much part and parcel to social policy,” said Nocos.

“In Canada, I think we think of it more of just like, as a market mechanism, as something of personal finance as some part of the financial sector, rather than something that is more of a public good.”

“I think that needs to change if we’re to alleviate the housing crisis,” he said.

Government spending history 

The federal government significantly ramped up its investment in housing throughout the 1970s, according to data from the Broadbent Institute. 

Spending on public and acquired housing increased sharply during that period, before shifting in the 1990s toward non-profit and cooperative housing.

Today, federal funding is largely delivered through the 2017 National Housing Strategy, a 10-year plan to expand affordable housing through a mix of programs and partnerships.

But the strategy is set to expire this year.

A recent report from the Parliamentary Budget Officer suggests federal housing spending is projected to decline 56 per cent next year, from $9.8 billion in 2025 and 2026 to $4.3 billion in 2028 and 2029.

Even with the ten-year plan, Nocos argues it has not kept pace with the demands. 

“In this federal government in the last election, one of the slogans they put in all of their ads was ‘get government back in the business of building housing.’ And one year in, governments back in the business of building housing is still left to be unseen.”

The CPA study found about half of non-homeowners want to own a single-family home or townhouse, yet these types of homes account for only about one-third of new construction.

Without stronger government intervention, Canada’s housing system is unlikely to correct itself, he believes.

“We’ve built a housing market over the past few decades that isn’t sustainable for population change,” he said. 

“Without the government getting back into the business of building housing, the market doesn’t adjust and people end up feeling stuck because there’s nothing being built for them at different stages of life.”

Relying on the market alone, especially in today’s volatile economy, could make the problem worse, Nocos added.

“If governments aren’t willing to intervene, we could be looking at a lost decade of housing policy.”