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While the average price of a home in Ontario has dropped since the pandemic peaked in 2022 — as has the national average — the province still has a housing market that is unaffordable for many people.

The economic strain caused by the pandemic prompted the Bank of Canada to hike interest rates, which hurt housing affordability across the country. Now, the income required to pay for housing costs remains high but is highest in Ontario and B.C. To address the issue, provincial governments have pledged to rapidly build more supply but Ontario lags when it comes to housing starts.

“The issue in Ontario is we’ve gotten so unaffordable that having slight decreases in prices doesn’t address the problem,” said Mike Moffatt, economist and senior director of the think tank Smart Prosperity Institute. “We have such a large hole to fill that we’re looking at a decade or more before we return to any kind of reasonable standard of affordability.” 

How did prices get so high so fast?

The real estate market is hypersensitive to the Bank of Canada’s interest rate changes. When interest rates were at their lowest during the 2022 provincial election, it was cheaper for borrowers to take out mortgages spurring a real estate feeding frenzy — buyers and investors piled into the market causing prices to surge. Toronto, the province’s hottest market, saw its average home price reach $1.33 million in February 2022. 

But once the Bank of Canada began to quickly hike its key lending rate to cool the rising inflation that followed the pandemic, it dampened the housing market. Sales activity dropped and remained sluggish in 2023 and 2024. 

The central bank recently switched course. With inflation under control, it began its interest rate cut cycle in June 2024 taking its key rate to three per cent from five per cent.

That has had an impact on housing prices. In the last two years, the average price of a home in Ontario was $964,500 in June 2022 (the last provincial election), then dropped to $850,000 by the end of 2024, according to the Canadian Real Estate Association (CREA). 

However, in June 2018 when Premier Doug Ford first took office the average price of an Ontario home was $598,700 representing a 42 per cent increase in seven years. Across Canada, home prices also increased during the same time period but at a rate of 29 per cent, and the national average price for a home is $150,000 less compared to Ontario.

In Toronto, covering home ownership expenses — mortgage cost, property tax, maintenance — requires more than 75 per cent of a median household’s income which is “still far exceeding” the 30 per cent threshold that defines housing affordability, according to an RBC report.

Vancouver’s home ownership expenses are the highest in Canada, requiring at 96.7 per cent of median income, and Edmonton’s are the least expensive at 33.6 per cent. Nationally, the number is 58.4 per cent.

What about rentals?

In 2024, average asking rents in Canada decreased for the first time since the pandemic with the largest decreases seen in º£½ÇÉçÇø¹ÙÍøand Vancouver. That was caused in part by lower interest rates, which allowed some renters to buy property, and lower immigration levels, which reduced demand. 

But since the 2018 Ontario election, rent for a two-bedroom apartment in the province is up around 40 per cent, averaging $1,758 in October 2024. The province’s rent increase in seven years is the same as the national average, but nationally, a two-bedroom unit averages $1,447 — a $300 decrease, according to Canada Mortgage and Housing Corp. (CMHC).

“Ontario’s rents are still considerably higher than the national average and all other provinces except B.C.,” said Ricardo Tranjan, senior researcher with the Canadian Centre for Policy Alternatives. 

Why is there not enough supply?

Building more housing stock is necessary to alleviate upward price pressure on housing, experts say.

“Policymakers can create significant measures to get at the core issue which is that there hasn’t been enough supply for the strong demand which was exacerbated during the pandemic,” said Robert Hogue, assistant chief economist at RBC.

That’s why the Ontario government announced a goal of building 1.5 million homes by 2031, which means around 150,000 homes need to be built every year. 

This year, the province will fall 5,800 homes short of its 92,300 goal. Current economic factors and aftershocks of the pandemic have led to a slowdown in construction starts across Canada. But Ontario seems to have a harder time getting homes built compared to other provinces, said Moffatt. In 2024, Ontario registered 74,326 housing starts — almost 5,000 fewer than in 2017, according to CMHC.

Over the last six years, Ontario has ranked in the bottom half of provinces in terms of homebuilding per capita. 

“Examining Canada’s 100 largest communities paints a stark picture of Ontario’s inability to build homes,” Moffatt said in a November 2024 report, adding only three communities, Pickering, Oakville, and Kitchener, had housing starts per capita in the top 20. British Columbia had eight communities crack the top 20, while Quebec had four.

There are a number of reasons why Ontario falls behind other provinces, Moffatt said, which include higher municipal and development charges, restrictive zoning prohibiting densification, and municipal permitting delays. 

But at the end of the day, “Municipalities are creatures of the province. The buck stops with the province,” he added.