When did housing become so unaffordable?

Housing affordability did not deteriorate overnight.

When we examine the data across major Canadian and U.S. cities, the timing and causes of the decline become increasingly clear. Affordability is commonly measured by the ratio of home prices to median household income. A higher ratio indicates that housing is becoming more difficult for the average household to afford.

Tracking this ratio in 2005, 2015, and 2025 highlights which markets experienced the most significant deterioration over time.

Toronto and Vancouver: Early imbalance

In Canada, Toronto and Vancouver experienced the steepest loss of affordability between 2005 and 2015.

A key factor was monetary policy. Following the 2008–09 financial crisis, the Bank of Canada kept interest rates near zero for more than eight years.

Unlike the United States, Canada avoided a deep housing correction, allowing low borrowing costs to fuel both end-user demand and speculative activity. Combined with strong population growth, this created sustained pressure on housing supply, which failed to expand quickly enough.

Montreal’s later shift

Montreal followed a different trajectory.

Most of its affordability decline occurred between 2015 and 2025, suggesting that the forces reshaping Canada’s housing markets gradually spread beyond the country’s most expensive cities. This reinforces the idea that housing affordability challenges are systemic rather than localized.

Why U.S. cities diverged

In the United States, fast-growing cities such as Dallas and Charlotte saw notable affordability declines but remain relatively accessible. Meanwhile, cities like Houston and Orlando experienced strong population growth with minimal impact on housing costs.

The difference lies in supply responsiveness. Where zoning and land-use regulations are more flexible, housing supply adjusts more rapidly to demand, preventing prolonged price escalation.

California’s partial self-correction

Los Angeles, San Diego, and San Francisco were already among the least affordable markets in 2005.

Their relative ranking has since eased, largely due to slower population growth rather than major policy shifts.In these cases, extreme housing costs appear to have reduced demand, creating a form of market-driven correction.

The common denominator: supply constraints

Across 2005, 2015, and 2025, the least affordable cities share a defining characteristic: strict zoning and land-use regulations that limit supply expansion. While population growth and speculation add pressure, it is ultimately the speed and flexibility of housing supply that determine long-term affordability.

Canada’s current response

Canadian governments are now addressing these issues through zoning reform, density increases, expanded development areas, and moderated population growth. Early signs suggest these measures are beginning to improve affordability in parts of Ontario and British Columbia.

Final takeaway

Housing affordability is not primarily a demand problem. It is a supply problem shaped by decades of restrictive land-use policy. Without sustained efforts to expand housing supply, affordability challenges are likely to persist across major urban markets.

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