Canada's national housing agency has announced that it is no longer feasible to achieve housing affordability levels seen in 2004. Instead, the Canada Mortgage and Housing Corp. (CMHC) will now use 2019 as a more realistic benchmark for assessing housing affordability.

In 2019, housing price levels were recorded before the pandemic-induced shift to remote work and the subsequent real estate boom fueled by low borrowing costs, leading to a significant spike in home prices across the country.

Despite a decline in home values over the past three years, the average Canadian home price remains around $700,000, which is 30 per cent higher than in 2019, according to data from the Canadian Real Estate Association. Additionally, the average monthly rent in the nation exceeds $2,000, as reported by rentals.ca.

To return to 2019 levels of affordability, CMHC suggests that Canada needs to double its homebuilding efforts over the next decade, aiming for nearly 500,000 new housing units annually.

These findings echo CMHC's initial housing supply shortage report from 2022, which highlighted the need for an additional 3.5 million housing units to be built by the end of this decade to restore affordability levels last seen in 2004.

The pandemic prompted a shift in housing dynamics as more Canadians embraced remote work, leading to a migration to more affordable regions and subsequently driving up home prices outside major job centers. For instance, in areas like Barrie and Chilliwack, home prices nearly doubled, peaking at almost $1 million.

CMHC's deputy economist Aled ab Iorwerth noted that the pandemic was a significant shock to the housing system, resulting in fundamental changes since 2019. Without a substantial increase in home construction, the report predicts that home prices will continue to outpace wage growth.

By 2035, CMHC estimates that the average home price in Toronto could reach $1.9 million, a 63 per cent increase from 2024. In Ottawa-Gatineau, home prices might hit $914,949, marking a 52 per cent increase, while Nova Scotia could see a 13.5 per cent rise in home prices.

Conversely, doubling the rate of homebuilding could slow the growth of home prices, with Toronto prices increasing by 20 per cent over the decade, Ottawa-Gatineau experiencing a 1.2 per cent decrease, and Nova Scotia seeing a 21 per cent drop in prices.

Increasing housing supply could alter Canadians' perception of real estate as an investment, leading to reduced capital growth expectations and less aggressive bidding on housing. This shift might prompt individuals to invest in money markets or the stock exchange instead.

Despite the shift to using 2019 as the benchmark, CMHC's initial report has successfully influenced the narrative around housing in Canada, with the real estate industry, investors, and all levels of government emphasizing the need for increased home construction.

CMHC continues to adhere to the standard affordability measurement where residents should not spend more than 30 per cent of their before-tax income on housing costs.