Ottawa is bringing other levels of government into its "deep dive" into Canada's housing sector, enlisting the provinces and municipalities with the country's two hottest markets to help it find solutions to the real estate conundrum.

In a speech in Toronto on Thursday, federal Finance Minister Bill Morneau announced the creation of a working group to study the state of the Canadian housing market over the summer and make recommendations on possible policy actions. The group will be made up of representatives of the federal, Ontario and British Columbia governments and the cities of Vancouver and Toronto – the two big markets that are struggling with the turmoil of dramatic housing booms and soaring prices.

"The working group that we're setting up will review the broad range of policy levers that affect both supply and demand for housing, will look at the issue of affordability and will look at the stability of the housing market," Mr. Morneau said in the speech.

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The formation of the working group emerged from the meetings of federal and provincial finance ministers in Vancouver on Monday that resulted in an agreement to expand the Canada Pension Plan. Mr. Morneau said that right after the meetings concluded, he sat down with B.C. Finance Minister Mike de Jong and Ontario Finance Minister Charles Sousa to talk about housing. He followed up with phone calls on Tuesday to Vancouver Mayor Gregor Robertson and Toronto Mayor John Tory, bringing the municipal governments into the fold.

Enlisting policy makers at the provincial and municipal level represents a recognition that the runaway housing markets in the Vancouver and Toronto areas, while potentially having national economic and financial-sector implications, are relatively isolated regional phenomena – which may require regional policy actions.

Data from the Canadian Real Estate Association show that last month's benchmark resale price for houses in Greater Vancouver was up 30 per cent from a year earlier, while the Greater Toronto Area benchmark price was up 15 per cent. But Calgary's benchmark was down 4 per cent, while Greater Montreal's price was up 1.9 per cent and greater Ottawa's was up just 1.3 per cent from a year earlier – evidence of the fragmented and varying nature of Canada's housing sector.

"We need to be co-ordinated in our approach, because taking action to help people in Vancouver could have unintended consequences for people in Calgary or people in Halifax or other parts of the country that aren't experiencing the same conditions," Mr. Morneau said in the speech.

He suggested that the federal government would consider further policy action of its own, if warranted, to "protect borrowers and lenders" and help maintain "a stable and secure housing market."

However, he said that "we want people to understand that while the federal government does have some levers under its control, we don't have all of them.

"This, in our estimation, is a shared responsibility, with provincial governments and municipalities having regulatory and taxation powers to respond to unique local concerns."

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As the Vancouver and Toronto housing markets have continued to run amok, observers have identified a wide range of factors contributing to the exuberance and an equally wide range of possible policy solutions. Some have pointed to a flood of foreign buyers as a major culprit in propelling prices and suggested introducing taxes or restrictions on foreign purchases, following the lead of Australia. Others have argued for luxury taxes on higher-end homes to curb speculative buying. Some believe the problem is rooted in acute supply constraints in these two cities, especially for single-family dwellings, and have urged municipalities to relax their density and zoning restrictions and to ease construction red tape.

Mr. Robertson has talked about enlisting the B.C. government to impose a new tax on vacant properties to discourage foreign investors and speculators from buying up homes that they neither occupy nor rent out. He and the Finance Minister, Mr. de Jong, are scheduled to meet on Monday to discuss the matter. Mr. Robertson has threatened to act alone with a business tax aimed at these property owners if the province does not step up.

"Today's announcement is a welcome sign that the new federal government in Ottawa is taking Vancouver's housing issues seriously," the mayor said in a statement. "With unregulated, speculative global capital flowing into Metro Vancouver's real estate, we are seeing housing prices completely disconnected from local incomes. First and foremost, housing needs to be for homes, not a commodity to make money with."

Ontario Housing Minister Chris Ballard said he hopes the working group will get to the bottom of what is causing house prices to skyrocket, and determine if there is anything that government should do.

"I talk to real estate agents, I talk to those who are trying to buy new homes, and pretty much everyone you talk to seems to have a slightly different idea of what the issue is," he said in an interview. "Whatever decisions the feds make, whatever buttons and levers they may pull, really have to be evidence-based."

Mr. Ballard cautioned that any solution also has to keep in mind concerns from existing homeowners about maintaining the current equity in their properties. "We really have to be careful about what tools we use, for fear that we do more harm than good," he said.

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At a news conference after the speech, Mr. Morneau would not put a timetable on when the panel might be expected to present its recommendations or when Ottawa would conclude its wide-ranging analysis of housing data – which earlier this month he called a "deep dive," a term he repeated on Thursday.

He also declined to discuss what policy options are being considered. "I'm not going to speculate on conclusions before we make sure we've done all of our homework," he said.

With reports from Tamsin McMahon and Adrian Morrow