Canada’s housing affordability issues have deepened as home prices have outpaced wage growth for more than a decade. With demand rising, supply stagnating and borrowing rules becoming increasingly restrictive, many Canadians, especially first-time buyers, find the pathway to homeownership slipping further out of reach. Meaningful reform requires coordinated action from both the federal government and financial institutions. Several practical measures could help restore balance to the market and make homeownership achievable again.

Unrealistic burden on buyers

As prices skyrocketed, minimum down payments did not adjust proportionally. While a 20-per-cent minimum once made sense, today it places an unrealistic burden on buyers facing $700,000 to $1-million starter homes in major cities. Reducing minimum deposit percentages, or better, scaling them with wage benchmarks could allow savings requirements to reflect real economic conditions.

One of the most innovative ideas is to “bond” or securitize down-payment savings, enabling funds sitting idle in buyer bank accounts to be redirected into the housing supply chain. Similar to investment bonds, these instruments would keep the money secure for the buyer while deploying the capital to developers, municipalities, or affordable-housing projects. This approach addresses two issues simultaneously: Easing the financial burden on first-time buyers and increasing the pool of capital for new construction.

Longer amortization periods lower monthly payments and improve affordability, particularly in high-priced markets. Canada already offers 30-year amortizations for uninsured mortgages; extending this to 40 or even 50 years, which is common in other countries, would give families more flexibility, especially early in their earning years.

Stress test disproportionately restrictive

The current stress test requires borrowers to qualify at a rate significantly higher than their actual mortgage rate. Designed to protect against financial instability, it has become disproportionately restrictive as interest rates climbed. A more reasonable system would tie the stress test to real risk metrics, such as income stability or economic region, rather than a blanket national rate buffer. This would keep households protected without locking qualified buyers out of the market.

The government can continue accelerating supply, building on the initiatives already underway in Ontario: By further fast-tracking development approvals, expanding tax credits and incentives for both builders and buyers, and increasing support for modular and factory-built housing. While progress has begun, sustained growth in housing supply remains the most effective long-term solution to improving affordability.

At the same time, Canada is overlooking one of the most immediate and impactful opportunities to ease the housing crunch: The 21,000 units of currently built inventory sitting unsold across the country. With a modest amount of government incentive, this existing stock can be rapidly transitioned into affordable housing for both end users and investors. Today, while governments plan to spend billions to construct new rental units, we already have a significant supply of completed, move-in-ready housing that could enter the market almost instantly. Redirecting this inventory into affordable ownership or rental programs would be one of the fastest and most cost-effective ways to expand Canada’s housing options.

Decisive action to support affordability and build housing

Over the past 24 to 36 months, Canada’s homebuilding and real estate sectors have been under immense pressure. Rising interest rates, construction cost inflation, labour shortages and increasingly cautious lending have combined to stall projects and slow new housing starts. Builders are delaying and cancelling projects, sales, marketing and ad agencies are closing, and job losses across construction, real estate and related trades are accelerating. This downturn is not just an industry problem; it is a national economic threat.

Without decisive action to support both affordability and the industries that create housing, the cycle will worsen. The time to intervene is now, before the losses of the past few years compound into an even more severe crisis for future generations.