Central bank governor calls for renewed government focus on boosting inventory
Bank of Canada governor Tiff Macklem has said lowering interest rates alone won’t solve the national housing crisis, with a concerted effort to boost supply required at government level.
Speaking before the House of Commons finance committee on Thursday, Macklem accepted that current surging housing costs have been caused in part by rising interest rates – but said affordability had been stretched even before the central bank began its rate-hiking path.
Macklem’s comments came just over a week after the Bank opted to leave its benchmark interest rate unchanged for a fourth consecutive announcement, keeping that trendsetting rate at a 22-year high of 5.0%.
“You’re not going to solve housing with low interest rates, and you’re not going to solve it with high interest rates,” Macklem told the committee. “We’ve tried both. And we’ve had high shelter price inflation.”
While calling on the federal government to boost supply in the housing market, Macklem also warned against stoking demand and potentially ramping up home prices further.
Governor Macklem and Senior Deputy Governor Rogers will appear before the House of Commons Standing Committee on Finance.
— Bank of Canada (@bankofcanada) February 1, 2024
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Mortgage interest costs, which have skyrocketed throughout the past year as the central bank has raised interest rates, contributed to 28.6% of the year-over-year increase to Canada’s consumer price index (CPI) in December, according to Statistics Canada.
Rent, another leading component of shelter costs, also surged on an annual basis, jumping by 7.7% in December compared with the same month in 2022.
The Canadian Home Builders’ Association (CHBA) recently sounded a dire warning on the housing inventory crisis, with its latest housing market index – released on Tuesday – showing builders remain gloomy about the outlook for home construction.
Homebuilder sentiment on prospects for single-family construction plummeted to an all-time low, CHBA said, plunging to 24.6 on a scale of 0 to 100. On the whole, 64% of builders surveyed built fewer homes in 2023 compared with the previous year, CHBA said, because of prohibitively high interest rates.
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