There's a number that tells the story of Canadian housing affordability better than any headline or political speech ever could: the price-to-income ratio.
It's simple math. Take the average home price, divide it by the average household income, and you get a number that shows how many years of income it takes to buy a home. In 1980, that number was around 3.5 in Toronto. Today? It's over 12.
That single shift explains why your parents could buy a house in their twenties while many people today are still renting in their forties. It's not about work ethic or priorities. The math just fundamentally changed.
Let's walk through what happened, decade by decade, and why this ratio matters more than almost any other housing statistic.
Understanding the Price-to-Income Ratio
Before we dive into history, here's what this ratio actually means.
If a home costs $400,000 and the average household earns $100,000 per year, the price-to-income ratio is 4. That means it would take four years of gross household income to pay for the home outright, or more realistically, it's a benchmark for how affordable housing is relative to what people earn.
Historically, a ratio between 3 and 4 has been considered reasonable. At that level, families can save for a down payment within a few years and manage mortgage payments without overwhelming their budget. When the ratio climbs to 8, 10, or higher, housing affordability breaks down for average earners.
That's exactly what's happened across Canada since the early 1980s.
1980-1981: The Baseline That Wasn't So Simple
In 1980, Toronto's price-to-income ratio sat at just 3.51 times the average household income. If you earned the median household income of around $25,000 to $30,000, you were looking at homes priced around $75,000 to $90,000.
Sounds affordable, right?
Not when mortgage rates hit 21.75% in 1981. Those sky-high borrowing costs meant monthly payments were crushing, even on modestly priced homes. So while the price-to-income ratio looked healthy on paper, the actual carrying costs were brutal.
Still, there's an important difference between then and now. High interest rates were temporary. They came down relatively quickly through the 1980s. But when the price-to-income ratio climbs, it tends to stay elevated for much longer.
The 1980s and 1990s: Stability and Steady Ratios
Throughout most of the 1980s and into the 1990s, something remarkable happened. The price-to-income ratio held relatively steady across Canada.
From 1980 to 2001, housing prices remained in a narrow range of 3 to 4 times provincial annual median income. There were regional exceptions, Vancouver and Toronto saw localized bubbles form and burst during this period, but nationally, the relationship between what homes cost and what people earned stayed fairly balanced.
Why? Because home prices rose slowly while incomes kept pace. Mortgage rates gradually declined from their 1981 peak, making homes more affordable even as prices edged higher. By the mid-1990s, rates had dropped to single digits, and the market had found an equilibrium.
This two-decade stretch represents what many housing experts consider "normal" affordability. A household could realistically save for a down payment, qualify for a mortgage, and manage payments without sacrificing everything else.
Then the 2000s arrived, and everything changed.
2001-2010: The Ratio Starts Climbing
Around 2001, Canada's price-to-income ratio began a steady climb that continues today.
Home prices started rising faster than incomes. Not dramatically at first, but consistently. By 2007, Canada's ratio had climbed past 6, and then past 9 by 2010. The gap between what homes cost and what people earned was widening year after year.
What caused this shift?
The 2000s commodities boom boosted Canada's economy, creating jobs and increasing household incomes. But home prices rose even faster, driven by falling interest rates, increased immigration, and growing investor interest in real estate.
The 2008 financial crisis actually accelerated this trend. While the U.S. housing market crashed, Canada's market stayed relatively strong. The Bank of Canada dropped interest rates to stimulate the economy, making borrowing cheaper. People could afford bigger mortgages, so home prices kept climbing.
By 2010, Canada began experiencing sustained home price growth that significantly outpaced income growth across most major markets for the first time in modern history.
2010-2020: When Ratios Hit Historic Highs
The 2010s transformed the price-to-income ratio from concerning to crisis-level in many cities.
Canada's ratio climbed past 10 in 2015, hit 12 in 2016, and kept rising. In Vancouver, the situation became particularly extreme. In 1994, homes cost about 8 times the median income in Vancouver. By 2024, that figure had risen to 14 times median income.
Think about what that means in practical terms. If a Vancouver household earns the median income of $89,771, they're looking at homes averaging $1.25 million. To qualify for a mortgage on the average home, they'd need to earn $226,680 annually, more than double what the median household actually makes.
The math simply stopped working for average earners.
Toronto followed a similar trajectory. In 1980, Toronto's ratio was 3.51, but by 2024 it had climbed to 12.51. That means a home that used to cost three and a half years of household income now costs more than twelve years of income.
This wasn't just happening in the big cities either. Calgary, Edmonton, Montreal, and even smaller markets saw their ratios climb throughout the decade.
The 2016 OECD warning that Canada's financial stability was at risk due to elevated housing prices started making more sense when you looked at these ratios. People were stretching themselves financially in ways that previous generations never had to.
2020-2022: Pandemic Surge and Peak Ratios
Then came the pandemic, and the price-to-income ratio hit levels never seen before in Canadian history.
With the Bank of Canada dropping rates to 0.25% and variable mortgage rates falling as low as 0.88%, cheap borrowing meant people could bid more for the same property. Working from home made people want more space. Competition intensified. Bidding wars became standard.
Home prices surged 20%, 30%, sometimes 40% in a single year in hot markets.
The price-to-income ratio peaked in the second quarter of 2022. At that point, houses weren't just expensive, they were mathematically out of reach for most Canadians earning median incomes.
Nearly half of gross income going to a mortgage payment. That's before property taxes, utilities, maintenance, or any other living expenses.
Where We Stand Today
By the third quarter of 2024, Canada's price-to-income index stood at 136.8, meaning house prices have outpaced income growth by almost 37% since 2015 alone.
The ratio has come down slightly from its 2022 peak as rising interest rates cooled the market and prices moderated. But we're nowhere near historical norms.
Today's price-to-income ratios remain roughly double what they were in the 1980s and 1990s. In major cities like Toronto and Vancouver, the ratios are even more extreme, sitting at levels that previous generations never experienced.
What These Numbers Mean for Real People
Let's translate these ratios into practical reality.
In the 1980s, a household earning median income could save 10% of their income each year and accumulate a 20% down payment in roughly two to three years. That same household today, trying to buy an average home, would need to save for over 25 years in Toronto.
That's not a typo. Twenty-five years.
Even in more affordable markets like Calgary or Edmonton, the price-to-income ratio now sits well above historical norms. What used to be achievable for middle-class families now requires either dual high incomes, significant financial help from family, or accepting a much longer timeline to homeownership.
The impact ripples through the economy. People delay having children because they can't afford space. They stay in jobs they dislike because they can't afford to move. They sacrifice retirement savings to scrape together down payments.
Why Ratios Matter More Than Prices Alone
Here's why the price-to-income ratio matters more than just looking at house prices.
A $500,000 home sounds expensive. But if the average household earns $125,000, that's a ratio of 4, which is historically normal and manageable. A $400,000 home sounds cheaper, but if the average household earns only $50,000, that's a ratio of 8, which is far less affordable.
The ratio accounts for local economic conditions. It shows whether housing costs align with what people in that area actually earn.
That's why Vancouver's $1.25 million average home with a ratio of 14 is less affordable than Toronto's similar price with a ratio of 12.5. And both are dramatically less affordable than Kelowna, where prices are lower and incomes are reasonable, resulting in a more manageable ratio.
The Regional Picture
Not every Canadian market has seen ratios climb equally.
Vancouver consistently ranks as the most expensive, with its ratio above 14. Toronto follows at over 12. But cities like Regina, Winnipeg, and parts of Atlantic Canada maintain ratios closer to 4 or 5, more in line with historical norms.
These regional differences matter. They explain why people are increasingly moving from Toronto and Vancouver to more affordable markets. They also explain why housing affordability is such a politically charged issue in some cities while barely registering in others.
Can Ratios Return to Historical Norms?
The big question: will price-to-income ratios ever return to the 3-4 range seen in the 1980s and 1990s?
Probably not quickly, and maybe not at all.
For ratios to fall significantly, one of three things needs to happen. Home prices need to drop substantially, incomes need to rise dramatically, or some combination of both.
Large price drops are unlikely without a major economic crisis. Even with recent corrections, prices remain elevated compared to historical standards. Governments and central banks tend to intervene before prices fall too far, worried about economic stability and homeowner wealth.
Income growth is happening, but slowly. From 1981 to 2024, median real hourly wages grew by 20%, with most growth occurring after 2003. That's not nearly fast enough to close the gap.
The most realistic scenario? Ratios stabilize at their current elevated levels. Prices grow slowly, roughly in line with inflation. Incomes gradually catch up over many years. Affordability very slowly improves, but never returns to what baby boomers experienced.
What This Means Moving Forward
For prospective buyers, understanding the price-to-income ratio helps set realistic expectations.
If you're looking in Toronto or Vancouver with median income, you're facing a mathematical challenge that previous generations didn't encounter. That's not a personal failing. It's a structural shift in the housing market.
For current homeowners, these elevated ratios represent significant equity gains, but they also mean your kids face a much harder path to homeownership than you did.
For policymakers, the ratio provides a clear measure of housing affordability. When ratios climb above 5 or 6, it signals that housing is becoming detached from what average earners can afford.
The Bottom Line
Canada's price-to-income ratio has more than tripled in many markets since 1980. What used to take 3 to 4 years of household income now takes 10, 12, or even 14 years in major cities.
This isn't about interest rates or mortgage terms or down payment programs. Those things matter, but they're details. The fundamental issue is that homes cost three times as many years of income as they used to.
That's the number that explains why housing feels impossible for so many Canadians today. The ratio tells the story in a way that individual house prices never could. And until that ratio comes down significantly, housing affordability will remain one of the defining challenges for an entire generation of Canadians.
The content of this article is for informational purposes only and should not be considered as financial, legal, or professional advice. Coldwell Banker Horizon Realty makes no representations as to the accuracy, completeness, or suitability of the information provided. Readers are encouraged to consult with qualified professionals regarding their specific real estate, financial, and legal circumstances. The views expressed in this article may not necessarily reflect the views of Coldwell Banker Horizon Realty or its agents. Real estate market conditions and government policies may change, and readers should verify the latest updates with appropriate professionals.
