Rising home prices make it harder for Canadians to relocate for jobs, affecting wages and productivity
Canada Mortgage and Housing Corp. (CMHC) reports that high housing costs are restricting population mobility, as many Canadians find it too expensive to buy or rent in cities where they seek jobs.
The federal housing agency’s analysis shows that a one percent increase in housing prices in a destination city leads to a corresponding one percent decline in the number of people moving there.
Since 1990, the percentage of households moving each year, including within municipalities, has dropped from 17.8 percent to 10.1 percent in 2020.
CMHC deputy chief economist Aled ab Iorwerth stated that multiple factors contribute to this trend, including an aging population and technological changes, but housing costs also play a role.
Ab Iorwerth noted that high housing costs affect both current workers and those entering the workforce, limiting skill development, and slowing economic growth in major cities.
“When choosing where to live and work, Canadians not only look at the wage increase they might get. They must be realistic about housing costs if they have to move to a new location,” he wrote.
Workers may forgo job opportunities that would improve their skills and knowledge if housing costs in the new city are too high.
Employers in expensive housing markets must offer higher salaries to attract skilled workers, increasing business expenses and reducing productivity.
CMHC’s analysis found that Toronto, one of the country’s most expensive housing markets, could increase its population by three percent if it doubled housing starts over the next decade.
Ab Iorwerth addressed the belief that population growth drives affordability issues in cities like Toronto and Vancouver. He pointed to data showing that Calgary and Edmonton have remained more affordable despite faster population growth over the past two decades.
“The reason for this is that more housing supply keeps house prices under control relative to income, which in turn attracts people,” he wrote.
Ab Iorwerth emphasized that population growth can be managed if cities expand housing supply. Without sufficient housing, an increase in population leads to rising home prices, limiting urban growth.
