Canada’s housing affordability gap has narrowed dramatically since last year, but the gains aren’t being felt evenly across the country, according to a new report from Parliament’s fiscal watchdog.
Interim Parliamentary Budget Officer (PBO) Jason Jacques released updated housing data on Thursday showing that the gap between average home prices and what a typical household can afford has dropped from a high of 80 per cent in September 2023 to 34 per cent as of August 2025.
The PBO attributed the improvement to lower borrowing costs, rising wages, and a cooling in home prices since their pandemic-era peak. The Bank of Canada’s rapid rate hikes pushed its policy rate above five per cent, dampening housing demand, but subsequent cuts have lowered the rate to 2.5 per cent, easing mortgage costs.
Despite this national progress, Jacques warned that “people don’t really live in Canada. They live in homes that are located in cities across the country. And those home prices and the dynamics around it are very much locally based.”
Regional Differences
The report shows Toronto and Hamilton saw the largest improvements in affordability over the past three years, but home prices there remain far from affordable. Halifax currently faces the widest affordability gap at 74 per cent, while Edmonton has the smallest gap at just 4 per cent.
Calgary, Montreal and Québec saw affordability deteriorate, though mortgage carrying costs in those markets remain comparatively low.
Mortgage Burden Falling
The PBO also assessed financial vulnerability using mortgage debt service ratios — the share of household income devoted to mortgage payments. It found “significant progress” in bringing these ratios back to 2019 levels nationwide. Improvements were strongest in Toronto, Vancouver and Victoria, but households in these expensive markets remain more financially fragile than those elsewhere.
Building More Homes — and Rethinking Prices
The Canada Mortgage and Housing Corporation (CMHC) estimates Canada must double its pace of homebuilding to 480,000 units annually by 2035 to fully restore affordability. The federal government has pledged to double construction rates, but some experts argue that controlling home prices is just as important.
Paul Kershaw, a policy professor at the University of British Columbia and founder of Generation Squeeze, said policymakers deserve credit for progress but need to focus on keeping home prices stable. “Having home value stall or fall minimally is exactly what we need for the indefinite future, so that there is an opportunity for earnings to catch up and help us restore affordability forever,” he said.
Housing Minister Gregor Robertson has maintained that home values don’t necessarily need to drop, pointing instead to initiatives like Build Canada Homes, which aims to boost affordable and non-market housing stock.
Kershaw welcomed more non-market housing but said realistic expectations are needed. “Keeping prices in the regular market steady will be critical for the majority of Canadians who own or rent in that system,” he said.
While affordability is improving overall, the PBO report underscores that Canada’s housing story remains local — with some cities on the path to relief, and others still facing deep challenges.