Falling home prices won’t end Canada’s housing crisis

Prices may be slipping and interest rates easing, but homes remain far out of reach for many Canadians

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Falling house prices and lower interest rates will not solve Canada’s housing crisis.

Prices remain far above historic levels. Canadians are taking on larger mortgages, while much of the new housing being built targets buyers at the top end of the market.

This affordability problem has been especially severe in major cities like Vancouver. Recent reductions in house prices and interest rates may give the impression the situation is improving but the declines have been too small to restore affordability.

Canada has had the largest drop in housing prices among advanced economies. After adjusting for inflation, home prices were down five per cent in the third quarter of 2025 compared with a year earlier. Even after those declines, however, home prices remain far beyond what many Canadians can afford.

Home prices in Vancouver today are almost 50 per cent higher than they were in 2010, and no one was calling houses affordable then.

The size of new mortgages is rising about as fast as house prices are falling and now averages $364,778. Lower interest rates should make housing more accessible, but homes remain out of reach for many Canadians. For first-time home buyers without real estate equity from selling a previous home, the average mortgage climbs to $441,301.

Debts of that size can be difficult to manage even at lower interest rates. Many homeowners who secured mortgages when rates were unusually low will soon face renewal at much higher borrowing costs. Delinquency rates are expected to continue rising, particularly among younger borrowers with lower savings and less secure employment.

The debate, therefore, shifts to the supply of homes. Governments continue to announce housing initiatives they say will increase construction. Too little and too late describes most of them.

The federal government recently added another 7,500 units to an earlier announcement of 800 new housing units. All of them will be built on military bases. While adequate housing for military personnel is essential, these units will do nothing to ease the housing shortage facing Canadian civilians.

Two questions, therefore, arise. Will these projects actually be built? And if they are, will the Canadians who need housing be able to afford them?

Recent developments in Vancouver suggest the first question is far from settled.

A luxury building in downtown Vancouver stalled before construction began and remains one of the most visible examples of a major project failing to move forward. Several smaller developments have also encountered problems. Westbank, a major developer involved in projects such as Oakridge and Senakw, for example, has faced financial and legal pressures that could complicate completion of some developments.

Even when projects proceed, affordability remains uncertain. Early-stage plans in Surrey propose two large residential towers containing thousands of units. Most would be condominiums, where prices have softened largely because many Canadians cannot afford them. Rental units are expected to come later in the project, but there has been little indication of whether those units will be affordable. Even if completed, Surrey officials estimate the project would meet only about half of the city’s housing needs.

An adequate number of homes is necessary to address Canada’s housing shortage, but supply alone is not enough. Too many developments are targeted at the top of the market, placing them beyond the reach of ordinary Canadians who are already struggling to find suitable housing.

Policies that require developers to set aside 20 per cent of rental buildings for below-market housing offer only limited relief. Those units exist only if the remaining 80 per cent of the building can be rented at prices many Canadians cannot afford.

The subsidized units themselves are also out of reach for many households. Rents are typically set for households earning around the median income, which divides the upper half of income earners from the lower half. That means roughly half the population may not qualify for these units at all.

The most serious housing problem remains those who are homeless. Ontario estimates about 85,000 people are currently homeless, and provincial projections suggest that number could grow by eight per cent annually, reaching as many as 300,000 within a decade if current trends continue. Reliable nationwide figures are not available.

Falling house prices and lower interest rates have not solved Canada’s housing crisis. For many Canadians, owning a home is still out of reach.

Dr. Roslyn Kunin is a respected Canadian economist known for her extensive work in economic forecasting, public policy, and labour market analysis. She has held various prominent roles, including serving as the regional director for the federal government’s Department of Employment and Immigration in British Columbia and Yukon and as an adjunct professor at the University of British Columbia. Dr. Kunin is also recognized for her contributions to economic development, particularly in Western Canada.