Mike Moffatt explains why housing is so expensive

Earlier this year we sat down with one of the country’s keenest observers of the housing crisis, Mike Moffatt, to get to the bottom of why housing is so darn expensive in Canada. Mike is an Assistant Professor at Ivey and the Senior Director of Policy and Innovation at the Smart Prosperity Institute.

Note that this interview was recorded in January 2023.

Where is the housing market right now, and how bad has affordability become?

“In markets like Southern Ontario and Lower Mainland BC, you're getting into a 12 to 15 times price-to-income ratio, which has made it incredibly unaffordable unless you're getting help with a down payment from parents or you bought meme stocks at the right time. So for young people in these markets, it feels like they've had to win some form of lottery. So it is a huge, huge problem. And then also what we're seeing in those markets is because the ownership side is so difficult, that's put a lot of pressure on the rentals market.”

What is driving that affordability problem?

“Ultimately it comes down to whether or not housing completions are keeping up with population growth, right? Essentially it's not the entire story, but that gets you about 70 to 80% of the way there. So you have some markets, like most of Quebec, that just haven't been growing all that fast. So they haven't had that much trouble keeping up with population growth. That would've applied to most of Atlantic Canada prior to about a year ago or two years ago when all the Ontarians started moving in. It was the same thing where they weren't growing all that fast and that put a lid on rents” 

How bad is the shortage right now, if we're trying to quantify it?

“There's a few different studies on this. And I'll look at the Ontario example. The CMHC says that we need to build over 2 million over 10 years, in order to hit the affordability levels of 20 years ago, which was a golden era for affordability. The housing affordability task force said that we need 1.5 million in Ontario. And to put that challenge into context, this 1.5 million number, we have not in this province built even half that many homes in any 10-year period since 1973 to 1982. So basically what we have to do is something we haven't done in 40 years and then double it.”

The interview excerpts above have been lightly edited for clarity and length. Listen to the full conversation here.