To Solve the Housing Affordability Crisis, Think Beyond Big Cities

January 21, 2025 – Canada cannot solve its housing affordability crisis simply by adding more homes in major centers like Toronto and Vancouver, according to a new report from the C.D. Howe Institute. Instead, the report urges policymakers to target a small set of mid-size cities and support them in becoming thriving, larger hubs which can meaningfully reduce housing costs nationwide.

In “Making Housing More Affordable in Canada: The Need for More Large Cities,” Jeremy Kronick and Paul Beaudry argue that focusing exclusively on boosting housing supply in big cities will be insufficient to improve affordability as it will be offset by increased in-migration from smaller cities. This would simply lead to more Canadians living in our expensive few big cities.

“We’ve been building more housing than is often acknowledged, but our efforts need to extend beyond Toronto and Vancouver,” says Beaudry, former Deputy Governor of the Bank of Canada. “We should identify a small set of cities with the strongest potential to grow and succeed and support them to become new large cities.”

The report finds that strengthening mid-sized cities like Kitchener/Waterloo, London, and Kamloops – by improving infrastructure, encouraging local business growth, forging university partnerships, and making it easier to build – can reduce in-migration into our big cities, mitigating price pressures there, and help lower costs for everyone.

“Secondary cities must reach a scale where they can harness agglomeration benefits – clustering industries and people to drive job creation, innovation, and productivity,” Kronick says. “Big cities will always draw talent and investment – and they should. But by growing our secondary cities into attractive destinations, we can reduce housing pressure on major urban centers and make affordability a reality nationwide.”

The report urges all levels of government to coordinate practical policies that support building up a small set of Canada’s smaller cities so they can join the ranks of our big cities and compete to make housing more affordable across Canada. These include reducing burdensome development charges, investing in transit links that connect large and smaller urban centers, and creating an environment that draws employers, innovators, and skilled workers to mid-sized regions.

Read the Full Report

For more information, contact: Jeremy M. Kronick, Vice-President, Economic Analysis and Strategy, C.D. Howe Institute; Paul Beaudry, Professor, Vancouver School of Economics (UBC); Percy Sherwood, Communications Officer, C.D. Howe Institute, 416-407-4798, psherwood@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.