Why Canada’s Housing Crisis Is So Hard to Fix

Canada’s housing crisis is a big problem that affects many people across the country. With home prices rising, more and more Canadians find it difficult to buy a house or find affordable housing. While many experts talk about building more homes as the solution, there’s another important issue that isn’t getting enough attention: the role of current homeowners and investors in keeping prices high.

How Homeowners Influence High Prices

For many Canadians, owning a home is more than just having a place to live; it’s seen as a smart investment. Over the years, people have come to expect that the value of their home will keep going up. This belief makes many homeowners resistant to any changes that might lower the value of their property because they want to protect their investment. This makes it harder to make housing more affordable for everyone.

Investors: Adding Fuel to the Fire

Another big reason home prices are so high is the growing number of investors in the market. According to the Bank of Canada, investors bought 30% of homes in the first part of 2023. This is higher than in previous years and shows that more people are buying homes not to live in but to make money.

When investors buy homes, they often turn them into rental properties or hold onto them in hopes that prices will rise. This reduces the number of homes available for first-time buyers, making it even harder for people to find affordable options.

Speculation: Expecting Prices to Keep Rising

Many people expect home prices to keep rising, which creates a cycle that drives prices even higher. During the COVID-19 pandemic, low interest rates and extra savings led many people to buy second homes, thinking that they could sell them for a profit later. This kind of speculation pushes prices up even more, making the housing market less affordable for everyone.

Government Policies and Politics

The government has introduced various measures to help make housing more affordable, like offering incentives for first-time buyers. However, these efforts sometimes make things worse by increasing demand, which can drive prices up even further.

There’s also little political will to do anything that might lower home prices. Lowering prices could upset current homeowners, who benefit from rising values, and politicians don’t want to lose their support. This makes it difficult to implement policies that could truly make housing more affordable.

A New Way of Thinking About Housing

To solve Canada’s housing crisis, we need to change how we think about homes. Instead of seeing homes mainly as investments, we should focus on making sure everyone can afford a place to live. This might mean creating new rules for investors to prevent them from driving up prices or introducing taxes on investors who own more than one rental or investment property. The money from these taxes could be used to build more affordable housing.

Limiting Multiple Investment Properties

One important step could be setting limits on how many investment or rental properties one person or company can own. Right now, investors can buy multiple properties, reducing the number of homes available for families who want to buy their first home. By restricting the number of properties an investor can hold and taxing those who own more than one, we can increase the availability of homes for regular buyers, helping to balance the market and make housing more affordable.

Conclusion

Canada’s housing crisis is a complicated issue with no easy solution. While building more homes is important, we also need to address the cultural and economic factors that keep prices high. By changing how we think about homeownership, limiting the number of properties investors can own, and taxing those with multiple properties, we can start to make housing more affordable for everyone.