Why are Houses So Expensive in Canada?
The Housing Crisis in Canada - And What Needs to Change
Affordable and adequate housing is a critical social issue which is key to the social and financial well-being of the great majority of people in all income groups.
Housing inflation effectively transfers wealth from all income groups to the very rich and puts extreme stress on those for whom housing is a necessity rather than an income opportunity (read about Generational Transfer). In Canada, the housing crisis is a real threat to long-term social stability and personal well-being.
High housing costs and low wages are the primary mechanisms which have reduced Canada’s equality level from 2nd highest in the world in the 1960s to the mid-20s currently. While there are several key factors that negatively affect house prices, the commercial media discuss housing as a growth market and an income opportunity touting “the wealth effect” or “asset enhancement” as the means by which all can become wealthy. In reality, only very narrow interests profit from unaffordable housing. Housing inflation, overall, is not a positive but rather a very large negative.
Why are houses so expensive in Canada, and why is this such a problem?
Factors that affect house prices
What causes house prices to rise?
Despite the media fixation with housing inflation and the number of houses built, housing is long term consumption, rather than a wealth producing mechanism. The media promotes housing inflation as it benefits their major advertisers consisting of banks, developers and other population growth-centric business models.
In fact, housing prices, although also enabled by low interest rates, are driven by demand, which in Canada, is 80% due to immigration. In the major centres, immigration constitutes 100% of demand as there is a net outflow of Canadians. In short, immigration is one of the key factors affecting the real estate market in our country.
How does immigration affect housing?
Interest rates are the same across the country and in low demand areas, very nice 1400 sq. ft. homes on nice lots in good neighbourhoods can be purchased for well under $200,000. In the areas whose populations are being swelled by massive levels of immigration, such houses would demand well over $1 million. Despite media denial or stonewalling, demand drives prices. Housing inflation is not the mystery the media make it out to be. What causes house prices to rise? Demand. What causes demand to grow? Immigration.
Immigration and housing prices are directly related. In the past 50 years Canada has built over 3 million additional residences to accommodate the nearly 10 million people the policy of mass immigration has added to the population. Even when the baby boomers entered the housing market swelling demand, governments still pumped up immigration levels, driving housing shortages and extreme housing and rent inflation. All of this was being cheered on by the commercial media, whose only growth path lay with population increases and the increase in local market size, along with the very juicy ad contracts from subdivision developers and debt institutions. With immigration driving their profits, the impact on housing prices for average Canadians was simply not a concern for media corporations. Media corporations are, after all, just corporations.
Government policy is now to further increase immigration levels in order to continuously drive housing market demand, resulting in a tripling of Canada’s population by 2120 and causing an additional 25 million houses and apartments to be dropped onto Canada’s fragile landscape, further driving housing prices. This assures nothing short of a massive and long term housing crisis in Canada. Canadians can abandon the hope that housing will ever become affordable or that house payments and rents will ever leave them with enough disposable income to get out of debt. Put simply, housing prices won’t drop until immigration is capped at balanced levels.
The current immigration policy is based on adding immigrants equal to 1% of the population annually, which is essentially the formula for exponential growth. In 2021, that would mean 380,000 immigrants are admitted and in 2120, the number would be 1 million. In other words, growth forever – whatever the social and environmental consequences.
Housing Inflation and The Future
The government can implement all sorts of bandaid and social housing assistance programs, but until the structural issue of demand and immigration is addressed, there will be no relief from crippling housing prices.
Needless to say, besides the impact on housing affordability, the social, fiscal and environmental costs of letting housing inflation continue in this way will be extremely large and extremely negative. Developers, speculators, debt mongers, cheap labour employers and media corporations will all continue to profit immensely though, allowing them to maintain their hold on political power – willfully ignoring the negative factors that not only affect house prices but the very future of Canadians. These groups are the least likely to lead this country or any other to any sort of transition to sustainability, because they profit exclusively from increasing and never-ending population and consumption growth. To address housing inflation, we need to tackle this narrative head-on.
The housing crisis in Canada has resulted from unethical policies and should not continue. Our government needs to focus on the goals of sustainability and social progress, with a strategy of population stabilization and reduced material and energy consumption. The issue of immigration and housing prices should not be taboo, but discussed openly and rigorously.
Population growth, as we are currently seeing it, makes any progress towards the goals of environmental sustainability and social progress impossible.