Federal government’s ‘affordable housing’ strategy doomed without strong income growth

Economist Mike Moffatt estimated that, if Canadian wages grow at the average rate seen over the past two decades—and if home prices remain stable—it would still take 20 years for Canada to achieve housing affordability levels of 2005… In other words, reality remains at odds with the Carney government’s ambitious rhetoric about delivering so-called “affordable homes.”

In a recent media scrum, the Carney government’s new federal housing minister Gregor Robertson—former mayor of Vancouver—was asked: “Should home prices go down?” His response: “No, I think that we need to deliver more supply, make sure the market is stable. We need to be delivering more affordable housing.”

Robertson’s response raises a follow-up question: what does the Carney government mean when it promises “affordable housing”?

Rising house prices are nothing new. The sticker price for the average Canadian home has increased in most years, barring periods such as the 2008–09 Global Financial Crisis. And house prices aren’t expected to fall anytime soon; forecasts point to continued house price growth. But for homebuyers, the key issue isn’t that prices are increasing; it’s whether they’re rising faster than incomes. By that measure, housing in Canada has become much less affordable in recent years.

Consider Minister Robertson’s tenure as Vancouver mayor from 2008 to 2018. During that time, the price of a typical single- or semi-detached Vancouver home grew from $690,000 to $1,980,000—a 187 per cent increase. Meanwhile, the after-tax income of a typical Vancouver family rose by just 15 per cent. Today, the typical single- or semi-detached home in Vancouver costs $2,380,000. Vancouver’s housing market is somewhat unique, but strong price increases reflect a broader national trend: home prices have risen dramatically even as income growth has stagnated, largely because housing demand—driven by immigration-fuelled population growth—continues to far exceed new housing construction.

Which takes us back to the question of “affordability.” Housing can become more “affordable” even as home prices rise, so long as the after-tax incomes of Canadians grow even faster. This has happened before—after-tax wage growth exceeded house price increases in the late 1980s, for example. Unfortunately, this seems unlikely to happen in the 2020s.

In fact, while house prices have soared, wage growth in Canada has stagnated. Consequently, in 2022 (the latest year of available comparable data), the typical worker in Alberta—Canada’s highest-wage province—earned less than the typical worker in low-wage U.S. states such as Mississippi and West Virginia. And from 2014 to 2024, Canada’s GDP per-person, an indicator of incomes and living standards, grew by a mere 2.0 per cent compared to 19.6 per cent in the United States.

In a recent analysis, economist Mike Moffatt estimated that, if Canadian wages grow at the average rate seen over the past two decades—and if home prices remain stable—it would still take 20 years for Canada to achieve housing affordability levels of 2005. And of course, much could go wrong—if wage-growth estimates fall short, mortgage rates rise or house prices rise, then that slow march towards housing affordability may never end for many Canadians including young people looking to start a family.

In other words, reality remains at odds with the Carney government’s ambitious rhetoric about delivering so-called “affordable homes.”

Again, the government wants to double the rate of homebuilding in Canada in a decade. Is that possible? Currently, Canada lacks the required savings and investment to fund that level of building. And due to tepid growth of our construction workforce, we currently do not have the manpower to build twice as many homes. And as always, local opposition to rapid housing development in certain neighbourhoods and public lands may also prove hard to overcome.

But even if somehow Canada was able to marshal the resources and political capital required for such a feat, according to Minister Robertson, the end result would only be to “make sure the market is stable.” Stable, based on today’s prices, means unaffordable for many Canadians unless incomes rise. Clearly, housing supply is only half the battle. To achieve housing affordability on any reasonable timeline, the government must not only help facilitate a major expansion in homebuilding but also substantial growth in Canadian incomes—something the Trudeau government failed to do.

The key is investment, which is required to expand the housing supply, grow Canada’s economy and boost wages. In a capital-scarce economy such as Canada’s, these goals may compete with one another. So governments in Canada, including the Carney government, must adopt policies that attract investment, such as streamlining regulation and reforming capital gains taxes. And crucially, rising incomes will only translate into improved affordability if Canadians can keep more of what they earn, which will difficult given that anticipated increases in federal spending will ultimately result in a higher tax burden. Ottawa must also craft immigration and residency policies so population growth doesn’t continue to overwhelm housing supply and further increase prices.

Canadians should think about housing affordability not just in terms of housing supply but as part of a broader economic challenge—one that also depends on growing the economy, increasing savings and investment, and limiting how much governments take in taxes. Only a comprehensive strategy, centered on broad-based growth, will make the dream of homeownership a reality for generations of Canadians.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute

Don't Miss

NDP’s collapse rightly cost them official party status

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

Federal government’s ‘affordable housing’ strategy doomed without strong income growth

2025 Federal Election / 28 mins ago

NDP’s collapse rightly cost them official party status

Carbon Tax / 48 mins ago

Carney picks up Trudeau’s net-zero wrecking ball

Business

Ontario government will spend more—for less housing

Published on May 26, 2025

Todayville

From the Fraser Institute

By Jake Fuss and Austin Thompson

To state the obvious, in Ontario homebuilding is not keeping pace with population growth. This imbalance is driving sky-high home prices and rents, not only in the GTA but many other Ontario cities.

What’s to be done?

In the Ford government’s recent budget, “housing” appears not as a central theme but as one of several areas to receive “support” (read: increased spending) in light of Trump’s tariffs, mainly in the form of more money for local infrastructure.

Specifically, the government will spend an additional $400 million on the Housing-Enabling Water Systems Fund and the Municipal Housing Infrastructure program (on top of the $2 billion already committed to these two programs until 2027). The government will also spend $325 million (over seven years) on a joint project with the federal government and City of Toronto for the waterfront revitalization plan, which includes new housing development.

And as part of this “housing” spending spree, the Ford government will continue to spend millions on the Community Infrastructure Fund—which targets smaller communities—and programs to encourage skilled trades, which could support housing development.

So, will Ontarians, including those who can’t afford to buy a home or struggle to pay their rent, get good value for their taxpayer dollars?

For the answer to that question, consider this. The Ontario government has already spent billions on its housing strategy, yet has not moved the needle on housing supply. Even Ford’s new budget with its massive housing “support” includes an abysmal forecast for new home construction. According to the budget, housing starts will actually fall from 74,573 in 2024 to 71,800 in 2025, continuing the decline from the 89,297 new homes started in 2023. And the budget now forecasts that only 303,700 new homes will be built between 2024 and 2027—an 18 per cent decrease from the 370,400 projected in last year’s budget.

This low level of homebuilding puts the Ford government’s target for 1.5 million housing starts between 2022 and 2031 further out of reach. In fact, if the projected average of housing starts from 2022 to 2027 is maintained until 2031, Ontario would fall short of its target by more than 680,000 homes—severely reducing the likelihood of any meaningful improvement in housing affordability.

The Ford government blames the slowdown in housing starts on economic uncertainty and U.S. trade policy. These factors matter, but there’s plenty of blame to go around. Major Ontario municipalities (including Toronto, Hamilton and Markham) are among Canada’s worst performing cities for how long they make homebuilders wait to receive municipal approval to start construction. Ontario municipalities also impose some of the highest upfront charges on new housing development—for example, a high-rise development in Toronto faces municipal charges nearly 20 times higher than in Edmonton on a per square foot basis. More fundamentally, the federal and provincial governments have failed to create the business and investment environment needed to finance housing development. And Ottawa’s supercharged immigration targets have created many more potential homebuyers and renters, driving up costs.

So again, what should the Ford government do?

Ontario’s housing crisis is a big problem with many contributing factors. For its part, the Ford government should focus on low-cost ways to spur housing growth. To the government’s credit, the recently proposed Protect Ontario by Building Faster and Smarter Act, 2025 is one such effort. The bill would require reluctant municipalities to allow more and denser housing development, streamline regulatory hurdles, and help reduce the upfront charges tied to new construction. It holds some promise for accelerating homebuilding.

If the Ford government wants to hit its housing target and offer hope to Ontarians struggling to buy or rent, it must shift its focus from spending to structural reforms. Real progress in the housing front requires cutting red tape and lowering homebuilding costs.

Business

Carney government’s proposed tax cut misses the mark—twice

Published on May 26, 2025

Todayville

From the Fraser Institute

By Jake Fuss and Grady Munro

On Monday, Parliament returns to the House of Commons, and the new Carney government will now attempt to implement the policy agenda it sold to Canadians in this year’s election. The government’s first priority is to follow through on its promise to cut personal income taxes for Canadians—a change that is long-overdue at the federal level. But the proposed cut misses two important considerations that will limit its effectiveness.

Specifically, the Carney government plans to lower the bottom federal personal income tax (PIT) rate (on income up to $57,375 per year) from 15 per cent to 14 per cent. The Liberal election platform suggests this change would reduce taxes for a dual-income family by up to $825 per year.

To be clear, the government should lower the tax burden on Canadians. When you add up all taxes (income taxes, sales taxes, property taxes, etc.) Canadians pay, the average family spends 43.0 per cent of its income on taxes—more than on food, shelter and clothing combined. In other words, taxes are the largest single expense families face.

While the Carney government’s proposed tax cut could help chip away at the staggering tax burden imposed on Canadians, the design of the tax cut (beyond the fact that this tax cut is paid for by borrowed money) limits its ability to improve overall economic growth and prosperity.

First, the proposed tax cut fails to improve economic incentives for many Canadians.

“Marginal” tax rates refer to the rate imposed on the next dollar of income earned. For example, consider an individual who earns $100 in income and owes $15 in total tax. If they are taxed at 20 cents on the next dollar they earn, they experience a 20 per cent marginal tax rate.

A wealth of research shows that marginal PIT rates influence the behaviour of individuals. Indeed, for decisions about whether to work more hours, take a new job that pays more but has a longer commute, become an entrepreneur, or whether to save your money and invest it, marginal PIT rates directly affect the rewards you receive from those decisions.

If the government lowers marginal tax rates, it provides a greater incentive for individuals to choose to engage more in these types of productive activities. As a result, Canadians and the overall economy will be more prosperous.

But by only reducing the PIT rate for the lowest federal tax bracket, the Carney government will lower marginal tax rates for some Canadians but fail to meaningfully reduce tax rates for high-skilled workers in particular. Many Canadians won’t see better incentives to work, save or invest, and the positive effect on the economy from the tax cut will be limited. Put simply, the narrow scope of the government’s proposed tax cut limits its effectiveness at improving incentives and increasing economic growth.

Second, the proposed tax cut does little to improve the competitiveness of Canada’s tax system.

In today’s interconnected world, countries must compete to attract the people (doctors, engineers, entrepreneurs, scientists, etc.) and investment that help improve economic growth and prosperity. While there are many factors that determine how attractive (or unattractive) a country is, lower and more attractive taxes play a big role.

There are many things that make Canada an attractive place to live and work, but our uncompetitively high income tax rates are not one of them. If you compare combined (federal and provincial) marginal PIT rates in every Canada province with those in every U.S. state, Canadians in every province face higher tax rates than Americans in virtually every state, across a variety of incomes.

For example, in 2023 an individual earning $50,000, $150,000 or $300,000 per year (in Canadian dollars) would face a higher marginal PIT rate in every Canadian province than they would in every U.S. state. And Canada is not just uncompetitive with the United States but with other advanced countries worldwide at the top levels of income.

By only reducing a tax rate for the lowest income bracket, the Carney government’s proposed tax cut does little to make Canada a more attractive destination for doctors, entrepreneurs, scientists or other skilled workers. In fact, the rate cut will likely have little to no effect on the decisions of people to move to (or keep living in) Canada. And do little to improve our living standards and prosperity.

As the Carney government works to deliver on its campaign promise to lower personal income taxes on Canadians, it should consider that the current plan does little to meaningfully improve economic incentives and tax competitiveness. Instead, it should consider more ambitious and broad-based tax cuts that affect incentives.