Canadian housing affordability improved only marginally in the second quarter of 2026, and analysts warn the multi-year relief that followed 2024’s price declines may be running out of road. RBC’s national affordability measure — which tracks the share of household income needed to cover ownership costs — sat at 52.8% in Q2, edging down just 0.4 percentage points, the smallest improvement in nearly a year, according to RBC economics.
Affordability Gains Losing Steam
RBC found that rising household income, not falling prices, accounted for essentially all of the quarter’s improvement. Firmer wage growth and government transfers, including a one-time top-up from the Canada Groceries and Essentials Benefit distributed in June, helped offset costs in most regions. Home prices, meanwhile, stabilized after a steady decline that had produced substantial affordability gains since summer 2025.
RBC cautioned that the improvement cycle appears to be nearing its end. Rising long-term bond yields are pushing up fixed mortgage rates, and the bank anticipates the Bank of Canada could raise its policy rate next year, which would also lift variable-rate payments. Higher energy costs are expected to add further strain on household budgets. RBC said it expects these pressures to trigger “a modest loss of affordability” as 2027 begins.
The pattern varied sharply by city. Vancouver remains Canada’s least affordable market by a wide margin, with an aggregate measure of 83.9%, even after ten consecutive quarterly declines that have unwound more than half of the pandemic-era spike in ownership costs. Victoria followed at 63.3%, still the third-worst among tracked markets despite steady easing since 2024. By contrast, Prairie markets looked comparatively stable: Calgary’s measure held near its long-term average at 41.3%, Saskatoon sat at 33.2% against a 30.9% long-run average, and Regina, at 27.9%, remained the most affordable market tracked, close to its historical norm of 27%. Edmonton, at 36.8%, showed less progress, with RBC noting the continuing gap versus its 32.8% long-term average may be discouraging some buyers from entering the market.
A Supply Problem Rooted in Regulation
While RBC’s data centers on interest rates, incomes and prices, other analysts point to a deeper structural cause: restricted housing supply driven by municipal regulation. Writing for the Macdonald-Laurier Institute, researcher Anthony De Luca-Baratta cited Canada Mortgage and Housing Corporation (CMHC) research using its Municipal Land Use and Regulation Index, which measures how efficiently cities approve development. The CMHC found that for every 10% increase in regulatory restrictiveness, home prices rise by 14%. De Luca-Baratta noted that because the average Ontario city scores 15% higher on the index than the average Alberta city, a $250,000 condo in a mid-sized Alberta town could sell for roughly $300,000 in a comparably sized Ontario city — a gap he attributed largely to regulation.
He also pointed to C.D. Howe Institute estimates comparing construction costs to sale prices, even after accounting for a 17% profit margin. In Toronto, a single-detached home costs an estimated $350,000 more to buy than to build. In Abbotsford-Mission, Kelowna and Victoria, that gap ranges from $255,000 to $415,000. In Vancouver, the difference reaches $1.3 million. De Luca-Baratta cited figures showing the average Canadian home price rose from $163,524 in 2000 to $718,400 in 2025 — a 339% increase — compared with general inflation of just 55% over the same period, and noted that nine in ten Canadians say they are worried about the state of the housing market.
Ottawa’s Response and Warnings of Falling Further Behind
Against that backdrop, the federal government under Prime Minister Mark Carney has moved to accelerate homebuilding as affordability pressure mounts, according to reporting from kalkine.ca, though the scale and mechanics of that push were not detailed in available reporting. Separately, a federal housing agency has warned that Canada risks falling further behind on affordability if current trends persist, according to a report from CoStar, underscoring the tension between policy efforts and the structural supply constraints identified by researchers like De Luca-Baratta.
De Luca-Baratta argued that Ottawa’s strategy remains too reliant on direct federal funding and control rather than using incentives, or “carrots and sticks,” to push municipalities toward cutting red tape — restrictions he said include density limits, zoning rules and high development fees that raise costs builders ultimately pass on to buyers and renters. He warned that without a shift in approach, home prices “will only continue to climb.”
Taken together, the recent data suggest Canada’s housing affordability landscape remains uneven: national measures show relief tapering off as rate and energy pressures loom, regional gaps between markets like Vancouver and Regina remain stark, and structural debates over municipal regulation continue to shape how policymakers and researchers frame potential solutions.
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