Canada’s housing crisis is multifaceted: Picture a Venn diagram of overlapping issues involving affordability, availability and price stability. In an ideal world, home prices would remain relatively flat on a nominal basis while the country increased productivity and wage growth, helping to address housing affordability issues.
Ideally, at the same time, a broad foundation of well-regulated, institutional rental housing would be added to the market, creating a stable and attractive rental housing option. This combination would enable housing affordability to improve in real terms while addressing housing's most fundamental requirement, sheltering the population.
Ottawa’s recent move to increase the Canada Mortgage and Housing Corporation's financing bond limit from $60 billion to $80 billion suggests the government is moving in this direction, increasing the availability of comparatively inexpensive debt to incentivize the development of rental housing and tackle the availability problem head-on.
If productivity gains and rising wages help to address housing affordability, the remaining challenge is restoring price stability for housing. While most residential markets are softening, the investment risk is uneven. Single-family homes in desirable suburbs are proving resilient, but high-rise condominiums, particularly in downtown Toronto, are far more exposed. Oversupply, weak presales and increasing vacancy pose a serious threat to condo pricing, trapping many private investors who own units that are now valued less than what they paid to buy them.
The same can be said for owners of cottages who may have purchased them during the pandemic when prices soared and interest rates were low, and now face a higher interest rate environment that will force a sale at a time when recreational properties have far fewer buyers.
Revisiting the foreign buyer ban could help to address these conditions and ease some of the current gridlock. Originally deployed in January 2023 as a sledgehammer intended to make housing more affordable, the foreign buyers ban, which has been extended to January 2027, prohibits non-Canadians from purchasing residential property in urban areas.
Rather than the current blanket restriction, policymakers could consider turning the tool into a scalpel by allowing targeted exemptions that are federally authorized and locally administered to channel overseas investment capital into distressed pockets without reigniting broad-based price hikes for housing.
These carve-outs would require strict guardrails, transaction quotas, minimum hold periods, and transparency requirements to prevent speculative flipping. The goal is not to inflate values but to stabilize vulnerable housing segments, such as Toronto condos.
In short, Canada’s foreign buyers ban was enacted as a broad-based tool to eliminate a large source of demand during a period defined by excessive competition. Times have changed. So should the tools.