Canada’s housing crisis—defined by the unattainability of homeownership for middle-class Canadians in the country’s major cities—has become a defining issue of our time. The gap between soaring home prices and stagnant wages risks leaving an entire generation struggling to enter the market with all of its attendant consequences, including delayed family formation.
The problem is often visualized as these two diverging lines: one representing the relentless rise of home prices, the other reflecting stagnant wages. To close this gap, we must address both.
On one hand, wages need to catch up—a slow and uncertain process. On the other hand, housing prices must become more attainable. The latter is where policy can have an immediate impact. A significant portion of the cost of a home—up to 30 percent or more—comes from government-imposed taxes, fees, and charges. Add to this the bureaucratic delays in approvals, zoning restrictions, and the prescriptive costs of third-party consultants, and it’s clear why housing has become unaffordable. The market is not failing; it’s being distorted by the government itself.
Nowhere is this more evident than in the oversupply of small, one-bedroom condominiums in cities like Toronto and Vancouver. These units, often purchased by investors and rented out, were once seen as a solution. But the market overcorrected in large part because these are only the housing units that governments would effectively permit.
Prices have since skyrocketed to $1,500 per square foot, and now, as pre-construction projects reach completion, investors face a harsh reality: the units they bought at peak prices are worth far less today. Renters can’t cover the costs, and banks won’t lend at inflated valuations.
This glut is likely temporary. By 2026 or 2027, the market will absorb these units, but the deeper issue remains. The current slowdown in new construction—driven by high costs and low demand—will lead to a future shortage. We’re trapped in a cycle of boom and bust, with long-term consequences for supply. The federal government has proposed building affordable housing at scale, but this approach is flawed. Subsidized housing is vital for the most vulnerable, but it won’t solve the broader market imbalance. The private sector, not the government, must be the primary driver of housing supply. Yet, developers are hamstrung by punitive taxes, restrictive land-use policies, and bureaucratic red tape.
There are glimmers of hope. The reintroduction of tax incentives for multi-unit rental buildings, modelled after the successful 1980s program, is a step in the right direction. So too is the reduction of development charges, though these are municipal fees, and federal influence is limited. The government could backfill lost revenue to encourage cities to lower these costs.
But some policies miss the mark. Restricting tax breaks to first-time homebuyers or homes under $1 million ignores the reality of expensive markets like Toronto and Vancouver. The market doesn’t distinguish between first-time and repeat buyers, and neither should our policies.
And none of these ideas are focused on boosting wage stagnation. One idea worth exploring is significant tax relief for young Canadians entering the workforce. Imagine exempting the first $500,000 of earnings—effectively allowing on average seven tax-free years to save for a down payment. This wouldn’t lower home prices overnight, but it would help a generation locked out of the market.
The key point here is that if Canadian governments are serious about addressing the country’s housing crisis, they must pair aggressive pro-supply measures—including streamlining approvals, reducing development fees, and incentivizing construction—with longer-run efforts to boost the purchasing power of Canadians. Without this mix of measures, we risk a social crisis where young Canadians can’t afford homes, start families, or build financial stability. Closing the gap between affordability and reality won’t be easy, but it’s necessary if we’re to overcome Canada’s housing crisis. It must start with a recognition of the dual nature of the problem and involve policies that both ease the burden on the private sector to boost supply while providing targeted support to those priced out of the market. If we act now, we can ensure that younger Canadians and future generations have a place to call home.
Generative AI assisted in the production of this article, based on an interview done on The Hub’s YouTube channel.
Matt Spoke is a contributor to Project Ontario, a grassroots political initiative focused on renewing and strengthening conservative leadership in Ontario. It…
