Macroeconomic Consequences of Unaffordability and Core Housing Need

Analysis Prepared by CANCEA on behalf of CMHC


The issue of housing affordability in Canada is intensifying, affecting households nationwide. One in ten households faced core housing needs in 2021, primarily due to poor affordability – defined as spending over 30% of pre-tax income on shelter. This trend poses significant risks to financial stability, educational and professional prospects, and mobility for many Canadians. The broader economic implications include heightened susceptibility to economic shocks, limited residential and labour mobility, and stagnant productivity growth.

Study Focus

This report delves into the macroeconomic effects of poor housing affordability across Canada and its provinces, examining the potential economic impacts if affordability pressures were alleviated over a 20-year period. The study categorizes households into three cohorts based on income and explores the varying responses of these groups to increased disposable income due to housing subsidies. The study’s nuanced approach considers the diverse ways households might use this additional income, whether for savings, consumption, or other essential needs.

Economic Implications

The findings reveal a potential annual increase of $24 billion in discretionary income for Canadian households if affordability pressures are reduced, translating into an average yearly boost of $22 billion in economic activity. Notably, the greatest benefits accrue to the lowest 10% of households, who face the most severe affordability challenges.

Key Findings

National Economic Impact: Addressing housing unaffordability could lead to a significant increase in disposable income, GDP growth, job creation, and tax revenue. This includes a $24.4 billion gain in disposable incomes and a $22 billion rise in GDP, accompanied by 189,000 new jobs and $5 billion in additional tax revenues.

Sectoral Benefits: The Manufacturing, Finance and Real Estate, and Accommodation and Food Services sectors stand to benefit most. This is attributed to the economic expansion from increased housing sector activity and altered expenditure patterns of households, such as increased spending on dining out.

Conclusions and Further Impacts

As Canada grapples with a housing crisis, particularly affecting low-income households, this study provides insights into the benefits of enhancing housing affordability. It examines economic impacts across various income groups and notes significant heterogeneity in household spending patterns. These differences are crucial in understanding how increased disposable income from housing subsidies translates into economic activity and saving behaviors.

The report also highlights the broader sectoral impacts of improved affordability, with notable effects on Manufacturing, Finance and Real Estate, and Accommodation and Food Services. Additionally, it references literature on the positive implications of housing affordability on residential and labour mobility, productivity growth, education, health, and child development.

The study underscores the vital importance of addressing housing affordability in Canada, not only for individual households but for the overall economic and social well-being of the country.


Download report:  Macroeconomic Consequences of Housing Unaffordability in Canada and its Provinces



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