Homebuilding is not keeping up with Canada's rapid increase in population

An undersupplied housing stock and high mortgage rates are putting pressure on Canadian consumers—and on the government

The housing crisis in Canada continues to put pressure on both homeowners and renters and is showing few signs of abating. While this should start easing once mortgage rates begin falling, likely midway through 2024, multinational’s should expect continued price sensitivity from Canadian consumers, particularly in large urban centers where rent prices are highest. Over the longer term, multinationals should ensure they are capturing opportunities resulting from the government’s efforts to increase the country’s housing stock. Multinationals should also ensure they are updating their assumptions to account for the higher tax burden on their own finances, as well as on those of their customers.


  • Housing inflation in Canada (6.5% YOY) continues to vastly outpace headline inflation (2.9%) and is responsible for two-thirds of overall price growth. 
  • The cost of mortgages increased by 25.4% in the year leading up to March 2024 due to the rise in interest rates and Canadians’ reliance on variable-rate mortgages.
  • Meanwhile, rapid increases in Canada’s population due to the government’s aggressive immigration targets are putting pressure on an undersupplied housing stock. 
  • The country’s population increased by 1.27 million people (+3.2%) in 2023, 97.6% of which came from immigration, while the number of homes remained flat.
  • Housing prices have increased 36% in the last five years, and rent prices have risen by 22% in the last two years alone.
  • The issue is fast becoming a hot-button issue in Canada, and threatens the ruling Liberal party’s prospects heading into the 2025 election.
  • Canada’s 2024–2025 budget will hike taxes on businesses and the wealthy to help solve the housing crisis.

Our View

When it comes to housing, Canadian consumers are caught in a perfect storm due to a combination of soaring mortgage rates and an aggressive mismatch in the supply and demand of housing. Housing affordability has taken a tumble and is taking down PM Justin Trudeau’s popularity with it: the cost of living has overwhelmingly emerged as the main issue facing Canadians today, according to surveys.

The government is taking steps to alleviate the crisis: in recent months, it has banned home ownership by foreign nationals, reduced the amount of visas granted to foreign students by 35%, and introduced a cap on temporary residents of 5% of the total population, down from 6.2%.

Ultimately, however, demographic shifts mean Canada needs immigration, and the country will press on with its immigration targets. The government has therefore taken measures to address the supply side of the housing equation: in its recently presented 2024–2025 budget, Trudeau’s administration introduced several measures to limit pressures on the housing and rental market, including freeing up government-owned land for housebuilding purposes. Together, they amount to CAD  42 billion and will help provide 3.87 million new homes by 2031, according to the government. Crucially, the measures will be funded by tax increases on businesses and wealthier segments of society: the capital gains tax on businesses is set to increase from 50% to 67%.

Still, it is likely to be too little, too late for the Trudeau government, and we hold our view that the opposition Conservative Party, led by Pierre Poilievre, will win the election, which is set to happen before October 2025.

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