The housing crisis seems to have no end in sight. While Mark Carney promised he would solve it, housing starts have fallen and now he is bailing out condo developers. Paradoxically, the government has made it clear that they in fact don’t want prices to fall.
Housing minister Gregor Robertson, when asked if he wanted housing prices to come down, said, “No. I think that we need to deliver more supply, make sure the market is stable. It’s a huge part of our economy.” Justifying the condo bailout, Carney explained that developers “don’t want to sell at a loss.”
In a recent report, the CIBC summed up the situation when they explained that, “Prices are still too high to buy and not high enough to build.” The Canadian Mortgage and Housing Corporation (CMHC) therefore projects housing starts to fall from 259,000 in 2025 to 247,000 this year, 223,000 in 2027 and 216,000 in 2028. This is in spite of the fact that Carney promised to construct 500,000 new homes per year.
This strange situation is due to the fact that the Canadian ruling class is addicted to the housing market and doesn’t want to bring the gravy train to a halt. They are desperately trying to keep the housing bubble inflated, because if it burst it would send the entire economy into a tailspin.
Addicted to housing
For a long time, housing prices tended to hover around three times household income. For example, in 2001, the average cost of a house was approximately $165,000. Household income at the time was approximately $55,000 which allowed many families to save up for a downpayment and buy a house.
But as the capitalist system entered into crisis, capitalists pulled their money out of manufacturing and instead looked for ways to make a quick buck through speculation. From 2000 to 2024, investment in machinery and equipment fell from 6.3 per cent of GDP to 3.3 per cent. On the other hand, residential investment increased which was just 4.3 per cent in 2000, averaged 8.3 per cent from 2018 to 2023. This is the highest among OECD nations (the top 35 advanced economies).
This process was compounded by the 2008 financial crash. In response interest rates were kept artificially low to encourage people to borrow money to keep the system going. This allowed more families to buy houses at a low mortgage rate. Meanwhile, it encouraged a frenzied speculative bubble as investors bought houses with borrowed money in order to flip them and make a quick buck.
Home prices were driven up to dizzying heights, creating a literal bonanza of easy profits and fat fees for developers, speculators and bankers. According to Statistics Canada, the real estate, rental and leasing sector has the second highest profit margin in the country at around 20 per cent—only beaten by finance and insurance. The real estate sector grew exponentially and has become Canada’s number one industry. This hit its peak in 2023 when the housing sector accounted for roughly 40 per cent of the country’s GDP—far higher than any other G7 nation.
By 2025 the average price of a home had skyrocketed to $740,000—a 350 per cent increase! This far outpaced household income which stood at approximately $106,000/year, pushing home ownership out of reach for millions.
The situation has gotten so bad that young people have resigned themselves to the fact that no matter how hard they work, they will never own a home. Those lucky enough to sink everything into a downpayment are also finding out they don’t really own their house either. They’re only renting it from the bank. And now those who have taken out a gigantic mortgage risk losing it all.
The problem of debt
One of the biggest beneficiaries of this process has been the banks who issued larger and larger mortgages to keep buyers buying which, in turn, raised prices even further. From 2000 to now, the size of the average mortgage has ballooned from $96K to $470K—an increase of 480 per cent. The big six Canadian banks have basically become giant financial landlords, sucking over $80 billion per year out of us in the form of interest payments from mortgages alone.
The result is that Canadian households now have the highest debt in the G7. Mortgage debt alone amounts to $2.4 trillion—which is equal to the size of the entire economy! This mountain of debt represents a ticking timebomb waiting to explode. As wages stagnate, workers are laid off and social services are gutted, millions of Canadians stand on the brink with hundreds of thousands in mortgage debt.
The ruling class has no real solution to this problem and instead handles the household debt like a truck handles a load of liquid nitroglycerin. They drive carefully. They tweak this or that interest rate. They come up with this or that banking scheme in an effort to delay the inevitable.
For example, the banks have systematically extended the period over which mortgages were repaid. In 2023, TD disclosed that a quarter of its mortgages had payment periods of 35 years or more. That same year, a fifth of CIBC’s mortgages were extended so that monthly payments didn’t even cover interest payments. Instead, the interest was added to the outstanding balance.
While these schemes have allowed lower monthly payments, many have become entrapped in lifelong, fundamentally unrepayable mortgages. This financial sleight-of-hand seems to have postponed the day of reckoning, but nothing has been solved.
Anyone with half a brain can see that this is unsustainable. The road ahead is tortuous and any bump could have explosive consequences. And the ruling class is doing everything in their power to not explode the bomb.
According to Statistics Canada, 66.5 per cent of the Canadian population are homeowners. This has meant that as long as prices were rising, homeowners were technically getting richer. No matter how big their mortgages got, households could always expect to owe less than their homes were worth. For many, their home became their retirement plan.
But in order for houses to reach affordable levels, prices need to decrease by 40 to 50 per cent. This is impossible without bursting the housing bubble and collapsing the Canadian economy. This would bankrupt millions of Canadians who would have mortgages worth more than the value of their homes.
Already, prices have decreased by approximately 20 per cent, which has left many with underwater mortgages: mortgages larger than their home is actually worth. This could tip things over the edge and lead to a rise in defaults. And a rise in defaults would further drag down prices. For the many workers forced to rely on their home values to retire, this would wipe out their life savings.
Unsurprisingly, in the last three months, Canadians defaulted on their debt at levels not seen since 2009. This doesn’t include mortgage bills, which are usually the last bills to go unpaid. Even then, mortgage delinquencies and arrears have surged since last year.
Undoubtedly, these developments have factored into the calculations behind the bailouts of condos in Vancouver and Toronto. The ruling class cannot allow the housing bubble to burst.
For a socialist housing plan
True to form, Conservative leader Pierre Poilievre argues that governments must cut taxes and fees on home building. But this will directly benefit developers, speculators, property investors, landlords or banks who have profited enormously from this speculative bubble. And there would be no guarantee that this would lead to new homes being built or that the cost of housing would come down.
Leftwing parties like the NDP and Quebec solidaire propose we tax big corporate landlords and fairly tax investment properties. They also propose that we raise the capital gains inclusion rate from 50 to 100 per cent. These are all proposals that communists agree with. If you think about it, it is rather insane that housing speculators have only been paying tax on 50 per cent of their profits. This has acted as a direct driver for speculation.
NDP leader Avi Lewis also proposes to create a public developer and building company to build 1 million non-market homes over five years. Lewis proposes to use modular home building to bring down construction costs and speed up delivery times.
By taking profit out of housing, this definitely takes things in the right direction. But who will pay for this? Lewis claims that they can be funded through increased taxes on corporate landlords and investment properties. It is possible that some of this money could be raised through taxation. But based on experience, if the capitalists are taxed, they tend to shift their money to more profitable areas, sabotaging attempts at taxing them. This would likely have to be financed through public debt which is already growing at an exceptional rate.
And then there is the fact that according to the Canadian Mortgage and Housing Corporation, we need nearly 5 million homes built by 2030 to bring housing prices down to the already unaffordable 2019 levels. Lewis’ proposal would only build 20 per cent of this—meaning we would still be relying on private developers who are currently building just over 250,000 per year. This would leave us 2.75 million homes short.
The problem with the proposals from someone like Lewis is that they tiptoe around the central contradiction of capitalism by trying to develop state companies which operate side by side with private enterprise. This relies on the private sector to build the bulk of the homes and leaves all of our wealth locked behind closed doors in corporate coffers and bank vaults.
Lewis’ proposals also fall flat because they leave working class families chained to the banks with their mortgages. As capitalism has turned housing into an investment, many working class families rely on their homes for retirement. Lewis’ platform, if implemented, would significantly bring down the cost of housing; but in doing so, it could burst the bubble which would destroy the retirement savings of millions of Canadian workers.
The only way out of this blind alley is with a socialist housing plan.
This starts by breaking the stranglehold of the banks. By expropriating these financial parasites, we could combine their massive resources into one central state bank run under workers control. This bank would work together with a central home building entity to launch a massive program of housing construction.
With the financial parasites out of the way, mortgage payments of working class families could be reduced to one third of income—guaranteeing that no family is thrown out of their home because stockholders need a dividend. As pensions have been gutted, millions of workers have been forced to rely on the value of their home as a retirement plan. This is why a socialist housing plan must be combined with the implementation of a genuine robust universal pension plan, so that workers would not need to gamble their savings on a mortgage to retire.
Only through a socialist housing plan, in which private ownership and profit are tackled head on, can we solve the housing crisis once and for all.
