Rising interest rates have worsened Ontario’s housing affordability crisis

The pressures of rising interest rates have worsened, not improved, the Ontario's overall housing affordability, according to new polling released by the Ontario Real Estate Association (OREA).

The third wave of the Housing Affordability in Ontario: Perceptions, Impacts, and Solutions survey, conducted by Abacus Data for OREA, indicated that 64% of Ontarians spend more than 30% of their household income on housing,

The poll also showed how the rising cost of living is impacting families in the province. Nearly all respondents (95%) think that living is more expensive now than it was just two years ago, and almost half say they may need to make tough decisions to make decent living.

To save money in light of rising rates, a lot of Ontario families are cutting back on entertainment or eating out, driving less, and decreasing their grocery expenditures.

Still, the desire for homeownership remains strong among renters, with 69% of non-homeowners stating that they "truly want to own a home" (+9). Only 5% of respondents said they would be content to rent a home indefinitely, a 17% drop from January.

“At a time when homeownership rates are on the decline, the desire to own a home is still growing,” said OREA President Stacey Evoy. “But these rapid, outsized increases we have been seeing to curb inflation are hurting Ontario’s families – it’s clear Ontarians are feeling the financial pressures of inflation amid an existing housing affordability crisis. Housing remains a spectrum issue across the province, and we must work together to keep housing affordable and the dream of homeownership within reach.”

While a portion of affordability may be addressed by falling property prices, overall affordability is not improved by this trend: according to 82% of Ontarians, rising mortgage rates are making it harder (37%) or much harder (45%) to buy a home.

“Now is the time to stay the course on these important changes. Rising rates might mask the problem as prices dip, but lack of supply remains a key issue,” said OREA CEO Tim Hudak.

Ontario's REALTORS proposed numerous solutions to the problem, including:

• giving millennials and young families more financial assistance;
• mortgage stress test review to update it to be more dynamic and responsive to a changing market;
• prolonging the amortization duration for mortgages insured by CMHC;
• removing single-family zoning restrictions in high-demand urban areas; and
• using surplus government land and turning them into businesses

“Housing is a spectrum issue, and Ontario needs new supply at any and every level in order to address the affordability crisis and help ensure everyone has a fair shot at owning a home,” OREA said. “However, all levels of government must work together and take quick, meaningful action to increase supply and improve affordability, creating future generations of Canadian homeowners.”