BoC's Rogers: Interest Rate 'Too Blunt' to Fix Housing — SkimNews
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- Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, told a business audience in Victoria, B.C. on Thursday that monetary policymakers are struggling to find new tools to address persistent housing affordability challenges.
- Housing's role in Canada's economy has roughly flipped since that time: in 2000, residential investment was 4.3% of GDP while business investment in equipment and machinery was 8.3%, and those shares are now 'largely reversed,' Rogers said.
- The Bank of Canada's policy rate is 'too blunt' to fix housing affordability alone, Rogers argued, because lower rates fuel rising prices while higher borrowing costs lock out prospective buyers — and the BoC 'cannot set one rate for housing and another for everything else.'
- Rogers defended the BoC's pandemic-era rate cuts to a floor of 0.25%, acknowledging cheap borrowing lowered barriers to homebuying but pushing back on critics by saying strong immigration, tight supply restrictions, and speculative views of housing as wealth also drove demand.
- The Bank of Canada is incorporating a housing affordability lens into its five-year mandate review with the federal government set for this fall, with Rogers noting that tracking home prices in inflation measures is complicated because housing is both an asset and a cost.
- Restoring affordability will require 'patience and co-ordination' across multiple levels of government, regulators, and the private sector to boost supply and reduce the economy's reliance on perpetually rising home prices — a job, Rogers stressed, that will not fall to the Bank of Canada alone.
- Past measures like the mortgage stress test have historically raised barriers to buying a home even while helping maintain stability, Rogers said, underscoring why she believes interest-rate tools are inadequate to the affordability problem.
Why it matters: Canada's housing sector has swollen to roughly 8.3% of GDP — nearly double its 2000 level — making the economy structurally dependent on rising home prices, which limits the Bank of Canada's room to cut rates without reigniting affordability damage and hands the problem to federal and municipal governments to fix through supply-side reform.
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