The Bank of Canada’s second-in-command told a Victoria business audience on Thursday that the central bank’s key interest rate is the wrong tool to make homes affordable, and that no single policy lever in Canada can do the job alone.
“Interest rates can influence house prices, but they are too blunt to target housing affordability directly,” Senior Deputy Governor Carolyn Rogers said in prepared remarks to the Greater Victoria Chamber of Commerce and CFA Society Victoria on Oct. 1, 2026. “Interest rates cannot directly address supply constraints. They can’t build homes, rezone land or speed up permits.”
The speech, titled “Canada’s housing affordability dilemma,” is the most detailed public account so far of what the Bank concluded about housing during its latest five-year review of its monetary policy framework. Rogers said the Bank examined two questions: whether it should lean harder against rising house prices, and whether the way shelter costs are measured in inflation adequately captures affordability pressures. On the second question, she said, “There was no simple change to our inflation measure that would do a clearly better job.”
Her central argument is that housing has become a trap for policy-makers. Falling prices improve affordability for buyers but erode household wealth and economic activity, while rising prices do the reverse. Rogers put numbers on how deeply housing is now woven into the economy. “About half of all bank lending is tied to residential real estate,” she said, and the average Canadian house price “rose about 50% in two years” during the pandemic.
She also pointed to a long-term shift in where Canada puts its capital. “In 2000, residential investment accounted for 4.3% of gross domestic product, while overall business investment on machinery, equipment and innovation accounted for 8.3%,” Rogers said. The Canadian Press, which covered the speech, reported that those shares have since largely reversed. Rogers tied the shift to the country’s weak productivity, saying, “Housing sits at the heart of our productivity challenge too.”
Rogers defended the federal mortgage stress test, introduced in 2017 by the Office of the Superintendent of Financial Institutions, as a financial-stability measure rather than an affordability one. “The experience since then has proven the value of the stress test. It did what it was designed to do,” she said, while acknowledging it did little to slow price growth. She also cautioned governments against incentives that add demand to markets where supply cannot respond.
The speech lands at an awkward moment for the supply side of the equation she says matters most. Canada Mortgage and Housing Corp. reported in mid-September that the six-month trend in housing starts fell 1.3 per cent in August to 244,149 units, with the monthly seasonally adjusted annual rate flat at 229,046 units. CMHC’s deputy chief economist said starts “continued to trend slightly down,” with Ontario posting the most notable decline.
Some of the levers Rogers named do appear to be moving, though slowly. A CMHC analysis reported by Storeys on Sept. 24 found that accessory units and small buildings of two to eight units made up 6.45 per cent of Toronto’s housing starts in 2025, up from 0.62 per cent in 2023, after the city legalized multiplexes citywide. The same analysis put the share at 18.07 per cent in Vancouver and 23.28 per cent in Edmonton. Those are municipal zoning decisions, exactly the kind of tool Rogers said sits outside the Bank’s reach.
For buyers and borrowers, the practical message is that the Bank does not intend to set rates with house prices in mind. “We set one interest rate for the whole economy. We cannot set one rate for housing and another for everything else,” Rogers said, according to The Canadian Press. The Bank’s next rate decision and Monetary Policy Report are scheduled for Oct. 28, and Statistics Canada reported this week that real GDP was essentially flat in July after three months of growth.
Rogers closed by arguing that the fix has to be shared across Ottawa, the provinces, municipalities and regulators. “Housing affordability will not be restored by asking any one policy to do more than it can,” she said. “That will take patience and coordination.”
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Sources: Bank of Canada, remarks by Carolyn Rogers (Oct. 1, 2026); The Canadian Press via Yahoo Finance; CMHC August housing starts; Storeys. Photos are illustrative stock photography, not of specific properties.
