Pop quiz: what is the “housing crisis?”
I had actually planned to write an entire blog post that examined this question (but not necessarily the answer), but then last week’s news cycle came along. We’ll get to that in a moment.
But if you had to define the housing crisis, what would you say?
I have some thoughts on this, in case you weren’t already aware…
My thoughts won’t be popular (I’m expecting a 70/30 split today) but at the same time, they won’t be untrue.
And for many of you who are well-read, the following might not come as any sort of surprise as it’s something I’m sure you’ve heard before elsewhere.
Simply put:
The housing crisis is actually: I can’t afford what I want.
That is the real housing crisis in this country, but we’ve become so used to having everything we want, oftentimes immediately, in most other areas of our lives that we’ve grown to develop an attitude of entitlement when it comes to housing.
Just consider how the world has changed in the last ten, twenty, or thirty years in other areas.
Yesteryear, if you wanted to find a companion, you’d go to parties to meet people, maybe go to bars and clubs. Perhaps you’d frequent a “trivia night” somewhere or join beach volleyball in the summer in hopes of running into other single people who wanted to meet a boy or a girl. But today, you go on your phone and you have thousands of people right there that you can scroll through with your thumb. You can do this at your desk at work, on your couch at home, or on the bus. It’s been made easy.
In the 1980’s, if I wanted to know what the Eiffel Tower looked like, I’d go to the school library, search for travel books in the card catalogue, find the appropriate section with the Dewey decimal system, then open a book and look for a page on France. But today, I simply go on my phone and I have ten million photos in an instant. You can do this from anywhere. It’s been made easy.
You don’t need your mom to drive you Thorncliffe Mall, then Eaton’s Centre, then Yonge & Eglinton to shop for blue jeans. You just order them from your phone.
We’re not that far away from cars driving themselves, after all.
While the world has become infinitely more complicated with every passing year, many components of our lives have been simplified. They’ve been made easy.
Say what you want about the world, but we’ve never had it better. And I’m the guy stuck in the past who wants to go to 1960’s London – but I’m still saying what I know to be true, that people have never had it better on this planet.
The by-product of this is that we don’t realize how easy we have it and we want everything else to be easier.
We want everything else to be better.
And because we’re in a country where, like it or not, the government has taken on a much larger role in our day-to-day lives than ever before and is often tasked with our general well-being, we’ve all made the assumptions that we can have everything and anything we want. In fact, the government has so much as told us this.
There is a very small population of the country that is unhoused, and who are looking for basic housing. While this is a situation that requires our attention, it is also not the definition of the “housing crisis,” and it’s most certainly not the crisis that the media and the rest of society are constantly clamouring about.
Instead, the same media that glorifies and sensationalizes housing is also telling us that it’s a crime we can’t all have the house that we want.
We also feel, for some reason, like we all have to own. Renting is not good enough!
Even though renting is part and parcel of “housing” as it’s described around the world, here in Canada, it’s become a crime to suggest that a person shouldn’t be able to afford the home that they want.
We saw this coming a mile away, didn’t we?
Recall this blog post from January: “What’s On My Real Estate Mind For 2025? (pt2)”
Bullet point #5 was “Home Ownership Rate.”
I wrote about how this would become a topic of greater importance in 2025, and while we’re not directly talking about this today, all the fervour about home prices in the media last week seems to suggest that everybody in the country should be able to afford to purchase the home that they want.
Let’s start from the beginning…
Last week, the former mayor of Vancouver and new Minister of Housing, Gregor Robertson, was asked by a pool reporter “Do you think home prices need to fall?”
Robertson made waves when he said that………GASP…….he didn’t. He added some other colour, but the damage had been done, accordingly to a large portion of the country (and the media) who felt that his comment was offside.
Just think about that for a moment.
Think about the implications of a society, in part, who want house prices to fall and who think house prices need to, for whatever reason.
Is that evidence of a housing crisis? Or is that simply like cheering for the Toronto Maple Leafs to beat the Florida Panthers because you are from Toronto but other sports fans are not?
The sheer amount of articles written about Mr. Robertson’s comment, and about further comments on this topic by Prime Minister Mark Carney, certainly caught me off guard.
Let’s start with this article:
“Canadian Government Has To Allow Home Prices To Fall To Make Housing More Affordable, Experts Say”
CTV News
May 23rd, 2025
Here’s what everybody is talking about, from the article:
Gregor Robertson, the former mayor of Vancouver who was elected to the House of Commons in April, sparked the debate after he was sworn in as housing minister earlier this, when a reporter asked him whether he thinks home prices need to fall.
“No, I think that we need to deliver more supply, make sure the market is stable. It’s a huge part of our economy,” he said.
Also from the article:
Days after Robertson weighed in, Prime Minister Mark Carney was asked the same question. Rather than offering a yes-or-no answer, he asserted instead that he wants “home prices to be more affordable for Canadians.”
I find this entire conversation to be incredibly ironic, given who voted the Liberals into power.
Statistically speaking, older voters overwhelmingly voted in favour of the Liberals.
Older voters own more houses than younger voters.
Older voters have a ton of equity in their homes, and thus these folks are the least likely to want the government to “make housing prices fall.”
But that aside, I would ask the following two questions:
1) Is it the ‘job’ of the federal government to force home prices to fall?
2) How would they do this, anyway?
The answer to the first question is an emphatic “no,” especially given how seniors voted in the last election.
The answer to the second question would keep me up at night, so I don’t even want to think about how the federal government could harm our economy deliberately, considering they are exceptional at harming the economy on a day-to-day basis…
But seriously: is it really the job of the federal government to make the housing market increase or decrease? Central banks might be tasked with increasing or decreasing the lending rate, and they use fiscal and monetary policy to expand or contract the economy as needed, but is it really the job of the government to “reduce home prices?”
Talk about “cooling the market,” if you want to. We’ve heard this before.
But there’s a difference between the following:
Cool the housing market – stop prices from skyrocketing in a time of hyper-appreciation.
Cool the housing market – stop prices from appreciating in any way, shape or form.
Cool the housing market – seek to keep prices balanced, level, and steady.
Cool the housing market – seek to reduce the value of homes.
Say what you want about the first two options, or even three.
But when you get to the fourth option, I think this is so far out of the realm of what’s logical or responsible, that I question the sanity of those openly advocating for this.
Answer me this:
When, in the history of modern civilization, has a country’s government deliberately tanked the value of existing homes by 30% and had this lead to economic prosperity?
People advocating for this have lost their minds, and yet it’s becoming a real ‘thing.’
The articles continued to roll in last week and we saw some really, um, “interesting” takes, like this one:
“The Only Solution To The Housing Crisis Is Falling Prices”
Toronto Star
May 16th, 2025
Oh, the Toronto Star? You don’t say!
From the article:
Robertson has only been on the job for days, but his comments — and his track record — indicate a politician more concerned with protecting the inflated value of some Canadians’ nest eggs than with making sure everyone has a place to call home. If he wants to serve the entire country, he needs to come out and say it: Home prices have to go down.
Got it.
“Home prices have to go down.”
I wonder where the author got his Masters in Economics?
At least he got the obvious part right – that the federal government, elected by seniors who have an inflated nest egg, is going to protect those inflated nest eggs.
Why would this come as any sort of surprise?
But seniors and their tax-free capital gains aside, I would ask again: where is the economic data to suggest that a housing crash is GOOD for an economy?
The Toronto Star had more to say:
“As Questions On Housing Go, It’s Just About The Easiest. So Mark Carney Needs To Give A Clear Answer”
Toronto Star
May 22nd, 2025
From the article:
Prime Minister Mark Carney recently restated that this is “not a yes-no question,” and that it depends on “different time horizons.”
But this kind of linguistic loopty-loop isn’t harmless. It’s a political strategy — one that dodges a simple but essential question: Is the goal of Canadian housing policy to lower home prices or not?
It is, in fact, a yes-or-no question. And the answer matters.
No.
The answer is no.
Housing “policy” to substantially reduce home values would have catastrophic consequences for the economy and would plunge the country into a recession, or worse.
But then there’s this:
And if prices are to fall, provincial and federal governments alike will have to act to mitigate the impact: protecting recent buyers from excessive financial distress, supporting homebuilders through the transition, and ensuring retirees who counted on home equity aren’t left behind.
The author argues that if prices were to fall, then the government would have to “protect recent buyers from excessive financial distress.”
So we’re just bailing them out?
We’re going to cause home prices to decline and then bail out those who were hurt by the decline?
That makes absolutely zero sense, but in the socialist republic of Canada, the answer to everything over the last decade has been for the government to make everybody whole. It only took about five minutes for Justin Trudeau, after Donald Trump announced his first round of tariffs, to stand up and announce that the government was there to bail out anybody affected. So why would a reduction in home prices be any different? Just print more money!
The Globe & Mail chimed in:
“The Liberals Sing The Same (Nonsensical) Housing Refrain”
The Globe & Mail
May 20th, 2025
From the article:
Setting aside the economic incoherence of Mr. Robertson’s comments, his quote indicates that he is firmly on the side of keeping home prices buoyant, or at least stable. That will play well with Liberal voters, which tend to be older and more established. But it cedes ground on a crucial issue to the Conservative Party, which has made large inroads with younger people who can’t afford homes.
Gasp!
Imagine a Housing Minister who wants to “keep home prices stable.”
As is usually the case, we have to turn to the National Post and the Financial Post to find any school of thought that doesn’t seem like it was bred in a first-year university classroom during a discussion about feelings and micro-aggressions.
Murtaza Haider and Stephen Moranis authored this:
“The Housing Market Can Be Made More Affordable Without Crashing Home Prices”
Financial Post
May 22nd, 2025
The sub-title reads:
“Canadians want a government that protects the value of their assets and safeguards their savings, not the other way around.”
No kidding.
From the article:
Already, Robertson has attracted criticism for suggesting that housing prices need not fall for affordability to improve in Canada. We believe the minister is correct in advocating for stability in housing prices. The criticism stems from a misconception that a price collapse is essential for restoring affordability.
Nothing could be more disastrous for the economy than a plunge in housing prices. A significant correction would wreak havoc on household finances, savings and both short- and long-term consumption.
Let’s unpack this puzzle. First, a large price decline due to an imbalance in demand and supply is highly unlikely. Given Canada’s immigration-driven population growth, demand for housing is expected to remain stable over the long term. Canada is also unlikely to overbuild housing to the extent that it would inadvertently exceed demand.
Further, urban economists anticipate housing supply will struggle even with moderate population growth. Therefore, only a sudden shock to the economy — such as a recession, pandemic or war — could lead to a drastic fall in housing prices.
The economic and social conditions following a massive collapse of asset values would erode market confidence, deplete the savings of vulnerable households and push aspiring homeowners farther from their goals. When prices fall, sales plummet (not surge) and listings linger on the market for months, awaiting elusive buyers.
Unlike other financial markets where a decline in asset values often presents a buying opportunity, aspiring homebuyers hesitate to bid when prices are falling. They are wise enough not to purchase a depreciating asset that will likely be worth less by the time the transaction closes. Securing financing during a price drop is even more difficult due to inflated loan-to-value (LTV) ratios. If prices continue to fall in the months between signing a purchase agreement and closing, the lender may adjust the valuation and ask the buyer for a larger down payment to keep their LTV below the required 80 per cent.
Some commentators present yet another unfounded argument for a decline in house prices. They mistakenly believe that because the Liberals were elected with the promise to restore housing affordability, Canadians expect them to facilitate a drop in prices.
Whoever believes that “expectations” are in any way in line with “campaign promises” will be sorely disappointed!
But an even better article is this one:
“Housing Will Become Affordable Only If Incomes Grow Faster”
Financial Post
May 23rd, 2025
From the article:
The key is investment: to expand the housing supply, to grow the economy and to boost wages. In a capital-scarce economy such as Canada’s, these goals may compete with one another. So governments need to adopt policies that attract investment, such as streamlining regulation and reforming capital gains taxes. Also, if rising incomes are to translate into improved affordability Canadians must keep more of what they earn. That will be difficult if increases in federal spending generate a higher tax burden. Ottawa must also craft immigration and residency policies that stop population growth from overwhelming housing supply and further increasing prices.
Every one of those hyperlinks will take you to another article that’s essential to understanding this line of thinking.
The line of thinking that tanking the real estate market is not the answer?
Yes, among other things.
But also the line of thinking that a strong economy is a “tide that floats all boats,” which is simply not what we’ve experienced over the last decade as federal government policies have stifled innovation, punished corporations based in Canada, taxed citizens beyond what is reasonable, and driven inflation through the roof.
I don’t expect anybody to read my thoughts and opinions on the matter without, at best, a grain of salt, and at worst, completely disregarding what I’m saying because I work in real estate.
“You don’t want the market to decline because you sell homes for a living!”
That has absolutely nothing to do with my opinions, and yet any contrarian will hang on to that no matter the argument.
I simply cannot believe that we’ve reached this point.
And as I’ve said before many times here on TRB, there’s nobody more guilty of driving up home prices in the first place than our three levels of government.
35.6%.
That’s the percentage of the cost of a new home in Ontario that is made up of taxes.
35.6%. Yessir. And if you want to know how and where, recall this blog post that I wrote last December: “The Increasing Tax Burden On New Ontario Homes.”
A large portion of society has this entire thing backwards.
Instead of asking the federal government to “bring down home prices,” resulting in financial hardship and lost equity for tens of millions of people, these same folks should be asking the federal government to focus on the economy. Spur job growth, encourage innovation in emerging industries, and invest in substantial public infrastructure that would make corporations want to headquarter and/or set up here in Canada. This is an unpopular take here, but the federal government also needs to stop its obsession with being the world leader in climate change policy, to the detriment of our economy and daily lives, and allow our country to be self-sufficient with our own natural resources, rather than forcing us to rely on imports. Canada could be a world superpower in the natural resource sector and this could be a key to our economy but that’s not going to happen with people like Steven Guilbeault in office. The man doesn’t want us to build any new roads. Seriously…
Excuse yet another trip down memory lane, but I feel an analogy coming.
Remember back in the 1980’s when you achieved a solid grade on a project, whether an 80% or an A+, and your project was tacked up on the bulletin board to be showcased for all to see? Then remember when new-age thinking said, “This just makes the children who received the lower grades feel bad,” so the kids who did well ceased to be acknowledged?
This is a microcosm of how we’ve changed over the last three decades in so many areas.
And now, instead of talking about how we can grow our economy and truly create the “tide that floats all boats,” because I think that metaphor is apt, and talking about how to build housing, or increase wages, or become world leaders in emerging industries that can provide the next generation with cutting-edge jobs, we’re talking about how to reduce the value of existing homes so that people who don’t own homes can buy homes.
Final thought: where is the talk about the housing crisis in Manhattan?
Oh wait, there isn’t one.
They’ve just accepted prevailing home prices because nobody has told them they should be able to afford whatever they want.
Happy Monday, folks!
Shawn
at 7:30 am
Brilliant piece. All right on the money. We need to get away from trying to level the playing field at all costs (and in many cases unfairly so) and offer incentives to make people want to achieve their goals.
Francesca
at 7:59 am
Manhattan was and is always perceived as a European city within NA in the sense that being an island there is nowhere left to build and there aren’t many housing options to begin with. It’s always been expensive as far as I know compared to wages so most people were happy to be in rent controlled apartments even if it meant never moving or owning. Toronto and most of Canadas largest cities, including Vancouver, used to be affordable decades ago and I think this is where the entitlement and anger of residents lies. If boomers were able to purchase a single detached home in the 50-80 S and often on one income why is the situation so dire now? Immigration, government taxes, inflation, investors speculation, salaries not growing enough are all factors that have caused prices to go up. Now we need a change in perspective that is hard for people to wrap their heads around. Renting isn’t a bad thing, living in a condo isn’t a bad thing, moving to the burbs or out of the city ..none are bad options if you truly want to own that detached house you cannot afford in the city! Life is all about making compromise and sacrifices but people like to complain in general and to blame outside sources when they cannot find their own solution.
Serge
at 8:12 am
= where is the talk about the housing crisis in Manhattan?
The New York Times publishes one-two-three articles on this subject every month, David.
The Fed could have crashed the prices, introducing taxes, but you are right, that will be a suicide.
The demographics is changing quickly, and the problem will “balance itself” soon, as T2 said.
Peter
at 10:33 am
Is that sarcasm? That the budget will balance itself?
That quote aged really poorly. Although nobody seemed to care.
Serge
at 9:16 pm
This is just a reference. David asked if the goverment should or could do something.
I think – as the phrase goes – there is no need in any Fed action, when “affordable housing” means “buying property”.
JL
at 8:50 am
A bit of a more nuanced take on this; I think a lot of the articles suggest more that government should “let” or “allow” prices to fall, rather than force them down (i.e. in the sense that “propping them up”, by way of demand inducing policies, would be the wrong move).
Completely agree that growing the economy is the ideal solution; but that will take time (both to achieve and to catch up to current house prices) and more importantly, that has always been the far more difficult road that no one wants to take (especially politicians).
So what have we done instead? Traded homes at ever inflated valuations completely detached from local economics. Even accepting supply and demand, market forces, and “reality” (wants/needs etc) broadly, that is never going to be a healthy recipe for long term societal success. You can’t have Canada’s stagnant economy as it is today with Canada’s (globally elevated) house prices and expect long term stability and prosperity on those terms; something has to give.
As for the Minister’s comments, it was his suggestion that both “prices don’t need to fall” AND “housing can become affordable” (at the same time) that sparked the critique, because over a reasonable time horizon no amount of economic twisting can square that circle.
Derek
at 9:24 am
Yeah, I get the question needs to framed at an extreme to encourage engagement, but the better question is probably, should the government “let” prices fall. At this point does it matter what government purports to do? Have prices fallen since peak? Yes? Did government do that? Are buyers endorsing last year’s prices? No? Did government do that? Will prices continue to fall? Yes? Did government do that?
Anwar
at 9:40 am
David, I will never tire of your trips down memory lane because they’re always right on point.
We lost our way some time ago. When “equality” went from being treated the same and having the same opportunities to society and the government looking to equalize everything. Now the job of the government is redistribution of wealth and income.
We’re not raising a future generation to strive for success because we shun and judge successful people, telling them they have too much, demonizing them for achieving. The nanny state we have created will encourage an entire generation to feel as though the government is their provider and that they don’t need to fend for themselves.
main uddin moin
at 5:40 pm
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Ace Goodheart
at 7:22 pm
Up where I live in the Junction area of west Toronto, there has begun to be a lot of unsold “crappy semis” in the low six figure and high five figure price range.
We have about 30 of them right now within walking distance of our house. Most have been sitting for a month or more. They all seem to have had failed offer nights, or simply not found buyers.
This would of course have been unheard of during the COVID housing boom, when people were snapping these things up in heated offer night bidding wars and with bully bids.
They are the usual “Toronto special”, unrenovated, one parking spot crammed in somewhere, small or no backyard, two bedrooms you could actually fit a bed in, a third you could use as a closet. One above ground bathroom, sometimes a second bathroom in the basement.
They aren’t selling anymore. They are just piling up.
Interesting to hear the real estate agent take on what is happening here. None of these houses would have survived an offer night during COVID, and many would have sold to bullies. Now no one wants them?
Derek
at 9:30 pm
They were quality listings, but only for a limited time.
Ed
at 9:53 am
Low six figures, high five figures.
Please provide some links.
Ace Goodheart
at 8:38 pm
Zoocasa. Search high park junction area for listings. Then just point and scroll.
Soooo many semis
Jonathan C
at 5:13 pm
You’re missing the elephant in the room – immigration policy. Wages have been intentionally suppressed (the so-called “labour shortage”) to the point where ordinary working Canadians cannot afford what it costs to build a typical house.
It’s not that houses are too expensive, it’s that a huge swath of the population can’t get a job that will allow them to save up a down payment and pay a mortgage.
Who benefits? Those same older people who own most housing and other financial assets.
Cut immigration to more reasonable levels and eliminate the TFW program and you would see house prices fall and wages rise. That’s the free market we should have.