Since 2000, average home prices climbed about 319%, while inflation rose by only about 69%. This one fact signals why Canada’s housing plan must fix a flaw that has long fueled unaffordability: the underestimation of housing inflation.

Many young Canadians have been shut out of home ownership partly because Statistics Canada failed to sound the alarm as prices began to soar. Its Consumer Price Index (CPI) shapes how we understand inflation, and guides the Bank of Canada’s rate decisions. When the CPI reads low, the bank keeps rates low, making it easier to borrow more and pay more for homes.

CPI hasn't accurately tracked home price increases because all that Statistics Canada monitors is the amount current homeowners spend on upkeep and mortgage interest. This downplays the largest burden first-time buyers face: the purchase price - and the size of the loan needed to cover it. The result is years of cheaper credit that helped inflate home values faster than wages, leaving younger Canadians paying the price.

Ottawa should seize the chance to fix this broken feedback loop as part of its housing plan and make sure the Bank of Canada the right tool for its job. Fortunately, Statistics Canada already has the answer - a newly tested “acquisition approach” that tracks housing inflation the way younger buyers experience it: by measuring the actual cost of acquiring a home, including the land it sits on.

For younger Canadians, the payoff would be enormous. Repairing the feedback loop between data and policy would stop the CPI from fueling inflation it’s meant to control. It would be a transformational win, fixing a problem that has done much harm over the past quarter-century and preventing it from repeating in the next.