Interest rates cannot solve housing affordability, Rogers warns
Bank of Canada Senior Deputy Governor Carolyn Rogers stated that the central bank cannot use monetary policy to target home prices. Speaking in Victoria on October 1, 2026, Rogers emphasized that solving housing affordability requires boosting supply and structural reforms.
Blunt tools and structural limits
Senior Deputy Governor Carolyn Rogers stated that the policy interest rate is a blunt instrument designed to manage inflation across the entire economy rather than manage house prices.
Speaking to business leaders in Victoria, Rogers noted that monetary policy cannot accelerate construction activity or streamline municipal permits.
A review of the Bank of Canada's policy framework found little benefit in changing how shelter inflation is measured.
Rogers warned that “targeting house prices directly with interest rates would ask monetary policy to do more than it can reasonably do,” adding that maintaining price stability remains the bank's core role.
From resilience to supply shortages
Past regulatory measures, including the mortgage stress test introduced in 2017, strengthened financial system resilience against higher borrowing costs without restoring affordability.
While low policy rates during the pandemic reduced mortgage expenses and spurred buyer demand, housing supply failed to keep pace due to population growth, zoning restrictions and infrastructure bottlenecks.
Housing has evolved beyond shelter into an investment asset tied to household wealth and credit.
A candid admission of institutional limits
The Bank of Canada rightly resists pressure to fix structural housing shortages with monetary tools.
Acknowledging that lower rates fueled demand while stress tests failed on affordability is refreshingly candid.
Without aggressive zoning and infrastructure reform, central bank restraint alone cannot restore affordability.
Source: The complexity of housing affordability
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