Vancouver and Toronto outpace New York in home unaffordability. Here’s why

A comparison of the largest cities in Canada and the United States underscores an uncomfortable truth: housing in Canada is deeply unaffordable.

Vancouver, Los Angeles and Toronto consistently rank among the least affordable cities in North America. The only slight improvement is that since our 2024 home unaffordability study, Toronto has slipped from second to third on the list of least affordable cities.

For years, some have argued that Toronto and Vancouver’s high housing costs are natural for “world-class cities.” But that logic collapses when New York and Boston – true global hubs – are more affordable.

Being world-class isn’t just about demand – it’s about wages to match. In Canada, incomes in Toronto and Vancouver lag far behind the soaring cost of home ownership.

The broader context

Since 2005, housing affordability has worsened in nearly every major city in Canada and the U.S., driven by asset inflation, which is when asset prices rise faster than wages. The main driver has been loose monetary policy, with money supply expanding about 7.3 per cent annually over the past two decades, which has fuelled price growth across asset classes, including real estate.

But that still doesn’t explain why specific cities keep ranking at the very top of unaffordability charts.

Why so unaffordable?

As I noted in an earlier article, Canada’s housing affordability began to diverge from that of the U.S. around 2007-08. In response to the global financial crisis, the U.S. slashed interest rates and turned to quantitative easing, in which the central bank creates money to stimulate the economy. Canada, though far less affected by the crisis, followed the same playbook.

The result was a surge in speculative demand layered onto an already constrained supply, pushing home prices in Canada increasingly out of reach for younger generations, particularly in Ontario and B.C. At the same time, Canadian incomes continue to lag those in the U.S., in part by an economy too reliant on real estate rather than productivity and innovation.

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Monetary policy is only part of the story. The cities topping the unaffordability list – Toronto, Vancouver and Los Angeles – share two traits: sustained population growth and restrictive zoning.

Crucially, population growth alone doesn’t make housing unaffordable. Texas and Florida have seen some of the fastest growth in North America, yet their cities remain relatively affordable.

The difference lies in regulation. Over the past decades, cities such as Toronto and Vancouver have imposed restrictive zoning and municipal red tape that choked supply. When housing can’t respond to demand, prices surge and affordability collapses.

A path forward

Multiple factors drive housing unaffordability, but the most practical fix is clear: boost supply. That means easing zoning rules and cutting red tape so builders can respond quickly to demand. Federal and provincial leadership must push municipalities to adopt faster, leaner regulatory systems, enabling the private sector to build more, faster.

Without decisive action, housing in Canada’s largest cities will remain out of reach for most young Canadians, widening wealth gaps as more people are shut out of real estate’s wealth-building opportunities.

Hanif Bayat, PhD, is the CEO and founder of WOWA.ca, a Canadian personal finance platform.