For years, Canada has faced difficulty building enough housing supply to accommodate demand in the country, resulting in increasing anxiety over housing affordability. Statistics Canada found that nearly four in 10 Canadians (38%) reported being very concerned with their ability to afford housing or rent because of rising housing prices in Spring 2024, up 8% from Spring 2022.
In a recent report, Scotiabank Economics identified Canada’s productivity problem as a key factor in our country’s housing affordability crisis. In economics, productivity reflects how efficiently producers combine various inputs to generate an output, which could be a good or a service. The higher this productivity, the lower the production costs and the higher expected profits are. The latter incites producers to increase their output, leading to more dwellings coming into the market in the case of housing producers. This rise in supply helps reduce pressure on home prices from rising housing demand.
Other factors like population growth and material costs have also played a role, the report found. Some demand-enhancing policies (e.g. for first-time home buyers) have exacerbated the demand-supply imbalance, a major contributor to rising prices.
The report can be read in full here: Canada’s Poor Productivity a Key Driver of Higher Home Prices.
Here are some key stats and findings:
