Canada’s Housing Crisis: Investor Role and Needed Solutions

This week, three out of four Canadians said they don’t trust Prime Minister Mark Carney’s ideas to solve the country’s housing problem. Many leaders, like premiers and mayors, say we should build more homes to fix this. But a recent poll shows that people are doubtful, and some feel hopeless.

House prices in cities like Vancouver and Toronto are very high. In Vancouver, the average home costs about $1.2 million, and in Toronto, it’s about $1.1 million. A housing expert named John Pasalis explains that the problem is not just about building more homes. He says that a lot of investors are buying homes, making prices go up.

John Pasalis wrote a report called The Great Sell Off: How Our Homes Became Someone Else’s Business. He says politicians are ignoring the fact that many homes are being bought by investors, not by families who want to live in them. These investors buy homes as money investments, not as places to live.

About 30% of homes in Canada are owned by investors. This number has grown a lot in the last 10 years. In British Columbia, half of the condos built in the last 10 years were bought by investors. In Ontario, the number is even higher — 57%. Pasalis says this happened because the government’s rules did not stop investors.

This causes two big problems. First, young people find it very hard to buy their own homes. Second, money goes into buying and holding homes instead of creating new jobs or businesses.

Who are these investors? They can be different people. Some are families buying homes near universities to rent out when their children don’t live there. Others are foreign investors buying condos hoping to make money when prices rise. Some are big companies that buy many houses to rent out. Sadly, most politicians do not want to stop this.

One reason could be that many politicians also own investment properties. A study in 2023 showed almost 40% of federal MPs are landlords or real estate investors. We don’t know if Prime Minister Carney owns such properties because his assets are in a blind trust. Also, politicians often get donations from property developers, so they may avoid taking strong actions.

Pasalis says Canada’s economy has made it easier to get rich by owning homes rather than by inventing or building new things. People think if the government builds more homes, prices will drop. But that is not true for houses. Houses are different from things like vacuum cleaners. Vacuum cleaners lose value over time, but houses usually become more expensive.

Pasalis explains that in the past, an affordable house cost about four times a family’s yearly income. Now, in Toronto, it costs about ten times, and in Vancouver, it’s twelve times a family’s income.

The focus on investors also causes developers to build the wrong kind of homes. Investors want small condos because they make more money renting them out. That is why cities like Vancouver and Toronto have many small apartments but not enough medium-sized homes for families.

What can the government do? One way is to reduce the appeal of buying homes just to invest. Pasalis suggests that taxes on profits from selling investment homes should be higher. Right now, investors pay less tax on the money they make from selling homes than they do on regular income. Pasalis says this should change so investors pay the same tax rate as people earning money from jobs.

This tax change would not punish anyone but would make investing in homes less attractive. Politicians and developers may not like this idea, but Pasalis says Canada needs big changes. The housing market has changed a lot, and old ideas won’t fix it. New solutions are needed to help Canadians own homes again.