OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

Deconstructing Canada's Housing Markets

Finance, Affordability and Urban Sprawl You or your institution have access to this content

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Author(s):
Calista Cheung1
Author Affiliations
  • 1: OECD, France

Publication Date
21 July 2014
Bibliographic information
No.:
1145
Pages
48
DOI
10.1787/5jz0zbg20h34-en

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House prices have increased significantly in Canada over the past decade, driving household debt and residential construction activity to historical highs. Although macro-prudential tightening has slowed the pace of household borrowing in the last few years, house prices have continued to trend higher, and affordability remains a major challenge in urban centres. First-time home buyers must therefore spend more of their incomes to purchase a house and are vulnerable to future interest rate hikes. Overbuilding in the condominium sectors of some cities appears to be a source of risk, especially if a major price correction in these segments spills over into other markets. The country benefits from a sound and effective housing finance system, which performed well throughout the global financial crisis thanks to strong regulatory oversight and explicit government backing of the mortgage market. Nonetheless, the dominance of the crown corporation CMHC in the mortgage insurance market concentrates a significant amount of risk in public finances. Improving competitive conditions in the mortgage insurance market could help diversify these risks and reduce taxpayer contingent liabilities, while introducing coverage limits on loan losses would better align private and social interests. There may be a shortage of rental housing in several cities, especially in the range that low-income households can afford. Urban planning policies have resulted in low-density residential development which contributes to relatively high transport-related carbon emissions. Addressing these externalities requires stronger pricing signals for land development, road use, congestion and parking, combined with better integration of public transit planning. To prevent the marginalisation of low-income households, planning policies should support social mix and increase incentives for private-sector development of affordable housing. This Working Paper relates to the 2014 OECD Economic Review of Canada (www.oecd.org/eco/surveys/Canada).
Also available in: French
Keywords:
development charge, mortgage markets, land use, subprime, macroprudential regulation, affordability, compact growth, mortgage securitisation, urban sprawl, household debt, property tax, social housing, house prices, financial system risk, housing finance, urban planning, financial regulation, rental markets, densification, housing
JEL Classification:
  • E02: Macroeconomics and Monetary Economics / General / Institutions and the Macroeconomy
  • E44: Macroeconomics and Monetary Economics / Money and Interest Rates / Financial Markets and the Macroeconomy
  • E61: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Policy Objectives; Policy Designs and Consistency; Policy Coordination
  • G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages
  • G22: Financial Economics / Financial Institutions and Services / Insurance; Insurance Companies; Actuarial Studies
  • G23: Financial Economics / Financial Institutions and Services / Non-bank Financial Institutions; Financial Instruments; Institutional Investors
  • G28: Financial Economics / Financial Institutions and Services / Government Policy and Regulation
  • H21: Public Economics / Taxation, Subsidies, and Revenue / Efficiency; Optimal Taxation
  • H42: Public Economics / Publicly Provided Goods / Publicly Provided Private Goods
  • H71: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Taxation, Subsidies, and Revenue
  • R14: Urban, Rural, Regional, Real Estate, and Transportation Economics / General Regional Economics / Land Use Patterns
  • R21: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Housing Demand
  • R31: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Housing Supply and Markets
  • R38: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Government Policy
  • R48: Urban, Rural, Regional, Real Estate, and Transportation Economics / Transportation Economics / Government Pricing and Policy
  • R52: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Land Use and Other Regulations
  • R58: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Regional Development Planning and Policy