The Canadian housing market stands at a critical juncture in 2025. After decades of accelerating prices, broken affordability records, and varying degrees of government intervention, homebuyers and renters alike are asking the same question: Is any of this working?

This comprehensive analysis dissects the multi-layered policy landscape currently governing Canadian real estate. From federal supply-side economics to municipal zoning reforms, we evaluate the efficacy, unintended consequences, and long-term projections of the nation’s most aggressive housing policies.

Executive Summary

Our analysis concludes that while 2024-2025 policies have successfully curbed speculative excess, the fundamental supply-demand imbalance remains acute. The Foreign Buyer Ban has had a negligible impact on prices due to the relatively small market share of non-resident buyers. Conversely, the Housing Accelerator Fundshows promising early signs of increasing density, but its effects will not be felt in inventory levels until late 2027.

The most immediate impact on affordability continues to be monetary policy. High interest rates have successfully damped price growth in Ontario and BC, but have simultaneously destroyed affordability for first-time buyers by increasing carrying costs. The "Stress Test" remains the single highest barrier to entry, effectively disqualifying middle-class earners from the market despite recent income gains.

1. The Foreign Buyer Ban: Politics vs. Reality

The Prohibition on the Purchase of Residential Property by Non-Canadians Act, extended recently, was pitched as a silver bullet to stop foreign capital from pricing out Canadians.

The Data

According to CMHC data, non-resident ownership in 2021 was roughly 2-6% depending on the market (Vancouver and Toronto being the highest). Since the ban's implementation, this number has dropped to near zero. However, prices have not correlated with this drop.

Why? Because domestic investors—Canadians owning multiple properties—make up a far larger segment of the "investor" class than foreign buyers ever did. Bank of Canada analysis suggests that over 20% of homeowners are multi-property owners. The ban successfully removed a political flashpoint but failed to address the domestic financialization of housing.

2. The Housing Accelerator Fund (HAF)

Unlike demand-side measures (like the foreign buyer ban), the HAF is a supply-side structural reform. By directly incentivizing municipalities to upzone exclusionary neighbourhoods, legalizing fourplexes, and speeding up permitting, the federal government has bypassed provincial gridlock.

Structural Changes vs. Timelines

Cities like Calgary, London, and Halifax have arguably seen the most benefit, rapidly adopting density-friendly bylaws to secure funding. In Toronto and Vancouver, the changes are more contentious but moving forward.

The Lag Impact: Policy changes made in 2024 to zoning don't result in finished homes until 2027-2028. We are currently in the "permitting gap." We expect housing starts to dip before they surge, as developers re-tool plans for higher density projects that are now legal but not yet shovel-ready.

3. Interest Rate Policy & The Stress Test

The Bank of Canada's aggressive rate hikes (and subsequent pauses) have been the dominant force in the market. While intended to curb inflation, they have created a "lock-in effect" where current homeowners refuse to sell comparatively cheap fixed-rate mortgages, crushing inventory.

Simultaneously, the B-20 Stress Test requires buyers to qualify at either 5.25% or their contract rate + 2%. For much of 2024/2025, this meant qualifying at nearly 7-8%. This regulation, while prudent for banking stability, has essentially created a tiered society: those who bought before 2022, and those who are locked out regardless of income.

4. The First Home Savings Account (FHSA)

The FHSA is widely regarded as one of the most effective demand-side policies in recent history. By combining the tax deductibility of an RRSP with the tax-free withdrawal of a TFSA, it creates a powerful vehicle for down payment accumulation.

Impact Analysis: For a couple, the ability to shelter $80,000 (plus growth) tax-free is significant. However, in markets like Vancouver where the benchmark price is over $1.1M, the $8,000 annual contribution limit is seen by critics as insufficient relative to asset appreciation. If prices rise 5% a year on a $1M home ($50k), the FHSA savings rate cannot keep pace. It is a helpful tool, but not a solution to the price-to-income gap.

5. Provincial Taxation: Speculation & Vacancy

BC's Speculation and Vacancy Tax (SVT) and Toronto's Vacant Home Tax (VHT) represent the "stick" approach to policy. These taxes aim to force supply onto the rental market.

Efficacy: Data from BC suggests the tax successfully repatriated thousands of units into the long-term rental pool. However, the definition of "vacant" continues to cause administrative nightmares for innocent homeowners caught in audits. Furthermore, while these taxes help rental supply, they do minimal work to lower purchase prices. They are a rental stability tool, not a homeownership affordability tool.

6. The Elephant in the Room: Population Growth

No analysis of Canadian housing policy is complete without addressing population growth. The federal government's targets for permanent residents, combined with non-permanent resident (student/worker) flows, have created a demand shock that supply-side policies (like HAF) cannot mathematically match in the short term.

CMHC estimates Canada needs 3.5 million additional homes by 2030 to restore affordability. Current construction pace is roughly 230,000 per year. Even with the HAF boosting this to 300,000, the deficit grows annually if population growth remains at 2023-2024 levels (over 1M/year).

Recent caps on international student permits are a tacit admission that housing infrastructure cannot support unrestricted growth. This policy pivot in late 2024/2025 is likely to have the single largest stabilizing effect on rental prices in university towns.

Conclusion & 2030 Outlook

Government policy from 2020-2025 has shifted from "demand stimulus" (cheap debt, buying incentives) to "supply interventions" (zoning reform, accelerator funds). This is the correct structural shift. However, the hole dug by 20 years of underbuilding and 5 years of hyper-population growth is deep.

Our Forecast

• Short Term (2025-2026): Stagnation. Prices will trade sideways as interest rates slowly recede but remain above pre-pandemic lows. Affordability improves slightly due to wage growth, not price drops.
• Medium Term (2027-2029): The supply from HAF zoning changes begins to complete. If population growth is successfully moderated to historical norms, we may see a "balanced market" return in secondary cities (Calgary, Ottawa, Halifax).
• Long Term (2030+): Toronto and Vancouver likely remain functionally decoupled from local incomes, becoming true "global cities" similar to London or Hong Kong, absent a radical decoupling of land value from property usage.