The housing affordability story in the biggest Canadian and American cities is driven primarily by zoning restrictions, land-use rules, monetary policy and population growth. Other forces, such as foreign investment, local economic performance and climate, matter too, but they tend to play a supporting role.
To measure housing unaffordability, we use a simple benchmark: the ratio of home prices to median household income. Tracking that ratio in 2005, 2015 and 2025 highlights which markets deteriorated the most over time. Among the cities with the steepest declines in affordability are Toronto, Vancouver and Montreal, and Dallas and Charlotte, N.C., in the United States.
In Canada, Toronto and Vancouver lost most of their affordability between 2005 and 2015. As noted previously, a key factor was monetary policy. Following the 2008–09 financial crisis, the Bank of Canada held interest rates near zero for more than eight years.
Unlike the U.S., Canada did not suffer the same depth of economic damage, nor did it experience a major housing correction. Historically low mortgage rates fuelled speculative demand on top of already-strong population-driven demand.
Montreal followed a different trajectory. Its affordability deterioration was more concentrated in the 2015 to 2025 period, suggesting that the forces reshaping Canada’s housing markets broadened over time, extending past the two most expensive cities.
In the U.S., some of the steepest affordability declines occurred in fast-growing cities such as Charlotte and Dallas, though both remain relatively affordable. Meanwhile, cities such as Houston and Orlando, Fla., also experienced strong population growth with little impact on housing affordability. This suggests that where zoning and land-use rules are more flexible, housing supply can respond more quickly to demand, limiting sustained price increases.
A story of affordability: How Canada’s housing market shifted in 2025
California is another interesting case. Los Angeles, San Diego and San Francisco ranked among the most unaffordable markets in 2005 but now sit lower in the rankings, partly due to slower population growth. This could be a form of market self-correction, in which extreme unaffordability gradually dampens demand by reducing a city’s appeal.
When we compare the three most unaffordable cities in 2005, 2015 and 2025, they share a defining feature: All of them are located in areas with stricter zoning and land-use rules, where housing supply struggles to expand in a timely way in response to demand.
Population growth and speculative activity can add pressure, but it is the supply side and how quickly it can respond that ultimately determines how unaffordable a housing market becomes.
These findings support tools already being applied in Canada. Municipalities are loosening zoning restrictions, often under pressure or incentives from federal and provincial governments, while Ottawa is moving to moderate population growth through immigration policy – steps that have already improved affordability in parts of Ontario and British Columbia.
If Canada continues to expand supply by easing land-use constraints and bringing more land into development, while keeping population growth in check, it can move the affordability needle.
Hanif Bayat, PhD, is the CEO and founder of WOWA.ca, a Canadian personal finance platform.
