New research from Statistics Canada points to a painful but unavoidable truth. Canada wants lower home prices and higher immigration, but we can’t have both, at least not without significant changes.
What kind of changes? Well, we desperately need changes to zoning in our biggest cities to accommodate new arrivals, especially in Vancouver and Toronto.
1.45 million new homebuyers by 2025
These changes are desperately needed because Canada will be home to hundreds of thousands of new Asian home buyers by 2025, as part of a total of 1.45 million new immigrants, according to StatsCan statistics.
Wherever they come from, new permanent residents in Canada will have one need in common: housing.
Many new residents will seek to purchase a home. The new foreign buyer ban won’t prohibit this because it makes an explicit exception for permanent residents.
That is why 2020 research found a direct link between Chinese and Indian immigration and increases in house prices. This research, “The impact of immigration on housing prices in Australia” by Morteza Moallemi and Daniel Melser, was published in Papers in Regional Science.
While the paper dealt with the Australian market, that country is in the same situation as Canada regarding affordability and housing supply.
Canada has all the preconditions for high unaffordability
The past 20 years of history have taught us that Canada has all the preconditions it needs for property prices to soar out of reach of the typical buyer, even without a single foreign buyer or new permanent resident.
Our stringent zoning rules and cheap financing pushed household debt levels higher and higher, year after year, ultimately making Canada one of the most unaffordable places in the world.
In January 2023, CREA reported the average national average home price was $612,000— 10 times the median household income after taxes.
We saw the biggest price boom during the pandemic — even though immigration, population growth, and foreign buying plummeted.
Yes, prices have fallen since the pandemic boom, but have they fallen enough for markets to accommodate nearly 1.5 million new residents?
I would argue not.
All levels of government must take drastic action to create new housing on a large scale. And we must tackle once and for all the fact that our big cities offer too few opportunities for medium or high-density housing.
The land of empty houses
Increasingly, Canada is becoming known as the land of empty houses. That’s what you might conclude from the comments Paul Smetanin, chief executive officer of the Canadian Centre for Economic Analysis, made to the Globe and Mail.
Smetanin found that an area of Toronto covering about 58 per cent of the region’s land mass has lost 478,000 people since 2001.
The culprit isn’t foreign buyers who leave their homes empty. The problem is that empty nesters are “over-housed,” as Smetanin puts it, in houses much too big for their needs. Smetanin points to two million spare bedrooms in the Toronto area and five million in the Golden Horseshoe region.
Empty nesters are not the villains in this story. Zoning policies that limit two-thirds of the city’s residential land to only one household per structure are to blame.
These problems aren’t limited to Toronto. Vancouver, too, is struggling to shift to a balanced growth development pattern that produces a variety of housing styles for people in all price ranges.
What can be done?
Zoning is one way to fix the housing shortage and affordability crisis.
In a July 2020 report, the Toronto Regional Real Estate Board found that municipal zoning restrictions have left that city devoid of a variety of housing. Instead, most urban areas consist of low-density single-family homes.
The report suggested addressing the missing middle by enabling mid-rise and medium-density homes in those areas. “Allowing secondary units in all Toronto neighbourhoods could result in the rapid addition of 300,000 to 400,000 units,” the report found.
Some have proposed even more dramatic changes to land use than simply changing the zoning of areas already used for housing. Two University of British Columbia professors believe things have gotten so bad that Vancouver must convert $20 billion worth of city-owned land, including golf courses, into affordable housing and nature parks.
Toronto and Vancouver need to develop new approaches, whatever the specific policies. Instead of depopulation, these new policies must bring more housing and residents to our cities.
By fixing the zoning policies, we can create more affordable housing, vibrant neighbourhoods, and healthier communities.
Yousaf Iqbal is director IQI Canada, the Canadian arm of real estate technology group Juwai IQI.
How about we cut the immigration numbers by half. Domestic workers would have their wages go up so they can earn a living wage and maybe they would be able to afford the rental rates never mind the home prices. There is plenty of housing. It is just being hoarded by those that are using it for investment and laundering purposes. Let’s take off any capital gains advantages for real estate and make it ordinary income. Let take off the primary residence exemption and you watch the supply coming onto the market! You just have to think outside the box. Housing shouldn’t be just another commodity, investment vehicle, and a haven for laundered money and therefore needs no special tax advantages anymore!
I suggest you take some basic economic courses!!
If you don’t think my solutions would bring supply to the market, it’s you that needs basic economic courses!
The supply will come due to no one can afford to buy-in
If any governments really want to help improve housing issues, should have less interventions, restrictions and bureaucratic, don’t rely on private sectors, ought to directly build housing for their own citizens. They dont want take full responsibilities on housing, if fails, the private sectors are not doing enough, that are the reasons; and worse the foreigners are the roots of the problems!
During the low interest rate era, stock markets are doing very good as well, do you hear any outcries about foreign investments in the stock market! and do you know that most real estate investments up to today generate negative cash flows?
Investors(locale or oversea) do mainly for the sake of preservations of capital as real estate is the most easy way to manage they think, they are surprised to learn the pains and risks being landlords.
Why rent is high?
Let look at property taxes, costs of electricity, hydro, water and sewage, costs of maintaince, materials, labours..on and on, will they go down?
Why housings are expensive?
Government fees are 20-30% of costs of building! Will the government for the sake of their good citizens willingly lower their fees! Will the costs of labours and materials go down? How about our Canadian dollars? Builders’ profit margins getting leaner and leaner to the point not worth to build residential housing any more.
Residential Tenant Act is consumer protection legislation, it says to balance between landlords and tenants, it never, it always stand with tenants, Landlord applications wait in line longer than tenants applications. The fees for Landlord applications are 3 or 4 times of the Tenant applications!
Governments should get down to their knees, roll up their sleeves and start building. Housing issues have been here for long times, it won’t get any better if they don’t change their mentality and attitude.
I think the sad thing is that the governments don’t know how to start and scare to start, they don’t want to be responsible to the mess they will creat. Do they really like to deal with tenants? They enjoy sitting on an arm chair just to collect the hugh fees, critize and shift the blames to everyone but themselves.
Hi Jorge, for individuals that own and operate properties as rental the proceeds do get charged as ordinary income and are added to their income taxes. As for primary residence exemption, that only applies when selling the property that you’ve been living in. If you didn’t have that you’d likely have even less supply in the market.
individuals owning rental properties are charged Capital Gains Tax at time of sale which is 50 % of what “regular” income tax would be. Basically the gain is cut in half and then added to ones income.
Problem with your approach, anyone using their property for investment and not primary residence is already taxed on the sale of the property. Exemptions with capital gains applies to primary residence, negating this exemption would then mean when you sell your home, you would then have 25% less value out of the sale forcing to either sell your home for much more, or taking major loss and maybe not affording a new home. More money in the government pockets and less in the people’s, isnt always the answer bud. If you want a simple solution, short term rentals need to go until the issue is resolved and immigration comes down to sustainable levels. Over 40% of home sales in my province in 2021 were documented as short term rental investment propertys. Houses per capita is actually the highest its been in 3 decades. So number of houses isnt the problem, it’s what they are being used for.
We desperately need immigration to fill the massive void created by our boomers retiring. There aren’t enough workers available in almost every sector in Canada. This challenge will become much worse in the next 10 years, even with immigration rates where they are.
If primary reside ces are no longer Tax Free then the Costs of ownership like Property Taxes,Maintenance Mortgage Interest etc would then be Tax Deductible.
ahh this Jorge guy obviously doesn’t own a house not understand anything about basic economics. The second you make principal residences fall under capital gains the real estate market collapses and Canada goes into a very very very bad recession!!
Like noses ….. everybody has one
I already see progress being made with the city relaxing their rules regarding zoning. I am hoping builders get in on this with multi-units that will be smaller and more affordable for first time buyers and new residents to Canada!
Majorly an eye wash to save skin, and to buy long long time
People have to be living in some awful places to want to immigrate into Canada… we moved from that Godforsaken country 11 years ago and are the happiest people on Earth… and people are leaving in hoards!
Good because we don’t need people like you here
I wasn’t born in Canada but I’ve been a citizen for 20 years. I think that anyone who lives in Canada for about 5 years (max time needed to adjust to a new place) and doesn’t appreciate what this great country has to offer is simply lazy, close minded, and unable to contribute to a better future for himself and his country. To me, anyone moving away from Canada after having lived here for a few years is simply a loser who would rather put up with the reasons why they left their country of birth in the first place rather than roll up their sleeves and get to work.
People come here for various reasons but if they’re not willing to contribute they need to get back where they came from. This has always been a land of opportunity for the strong, not a free for all. So stop whining about real estate prices. Canada has plenty of affordable real estate. If you want to live in Downtown Toronto and pay the same price you sold your house back home for, then it’s not a Canada problem; it’s your problem. And for God’s sake don’t complain about the cold: Buy a warmer jacket.
I think one of the most innovate solutions would be to approve a swath if land on the outskirts for first time homebuyers and zone it for tiny homes. A community will then build itself.
that’s an interesting idea, but tiny homes take up more land than apartments (because they aren’t stacked up). Why not build apartments or townhouses instead of tiny homes?
Nothing will be done to improve situation due to vested interests in real estate market, easy money for them. Discussions will remain on paper only. All are hand and in glove.
Jorge has a valid point in suggesting reducing the influx of immigrants certainly until community infrastructure can cope. I would suggest that the majority of immigrants are not in a position to buy a home and rental accommodation close to sources of potential employment and communication hubs should be the focus. We should stop preaching home ownership as an initial expectation for new Canadians.
Canada should be taking at least 4-5 Million people a year.
This is Canada’s time to shine and lead the world.
Aftab….Lol, Yeah lets fill up this country with immigrants and live like back home!
Yes we should bring more Immigrants , so will have a better housing
affordability in Canada and cheaper housing ,., which kind of argument
is this ? I wonder some times
No way. Turn country into a third world country. They should let them live in your home.
wow 4-5 Million, have you not read anything regarding homes and infrastructure , How about water treatment and sewage capacity, who do you think pays for all of this ??
You sound xenophobic, thank goodness you aren’t in charge of anything!
No is not, one needs to get the house in order before letting people in. I suggest you let the immigrants in your house. See how you can handle it
Canada is for the world!
It is good to see it being opened up to all!
Go Canada Go!!
This is global problem not because there are that many more people but because neighborhoods have become hotels for Airbnb investors.
Great Article. This is not a new problem.. The problem 1 is does our Government insist on Immigration with Prior Educated Knowledge and the Proven Skills and Resources to Comfortably Reside in this Country possibly without Employment and a Mandatory Application prior to entering? Next I read by the Realestate Companies that Foreign Investment is little. Let me give you some insight. I worked in Finance for a Large Canadian Bank. Typically I received no little than 10 Foreign Investor Home Buying Applications with mostly upwards to 25 plus per day usually through local Realtors with a mission to buy sight un seen. How’s your math. Me 1 person 1 City everyday. We know Blocks of New Builds being purchased as they are Built. The New Laws do little to circumvent this. Only the High Interest Rates at the moment. But if Foreign Buyers aren’t buying then how will Third World Immigrants and our already Residing Population going to Afford a new home. As per the Article the immediate Interest Rates, Price of Materials are a major Deterent for Any Builder. Honestly a this time Major Immigration is not a Bonus to this Country at the moment unless they come with Bags Full of Money. This is a complicated issue and I agree with others that Our Government is doing little and will do little as it has done Historically. I have so far lived through 2 Ressecions with Many loosing their Homes. Not Fun. By the way check out the Thousands of Student Rental Ads in every College or Univeristy Town in Brand New Homes converted to Rooming Houses. By the way already owned by Numerous Foreign Investors and Taxable Rental Income most likely not reported. I may be wrong. According to what I read and it’s not rocket science to purchase a home in the 3 Major Cities you would require Down Payments of Hundreds of Thousands of Dollars with Incomes exceeding Two Hundred Thousand. Immigration? What our your children facing in the future. Is the Government listening? All the Best
Airbnb, VRBO and the like need to die. Either ban them or tax the heck out of the to the point where they are an no longer an attractive asset class and use the funds to build affordable housing. Whichever we choose, enforcement is key, many STRs that are supposed to have permits operate without one to no meaningful consequence. The fines are just a cost of doing business instead of an actual punishment.
Short term rentals are a cancer on communities and are greatly responsible for the unaffordability of housing and the current housing-as-an-asset approach to real estate.
People are getting evicted so landlords can convert to short term rentals and they have nowhere affordable to go.
We have an aging demographic. Baby-boomers are entering retirement homes and passing away. We ALL know this, as we have a Nursing shortage that is expected to grow by a very significant amount.
All their homes will be for sale.
rents are high because of bad tenants in the past. we owned rentals but got out because the tenants had all the rights and we were left with the bill
Exactly eight, Deb.
Rent controls, etc. just makes one question the wisdom of not leaving the money in the bank or going with something with fewer headaches, less wear and tear, and return more in line with the value of the asset we have sacrificed and worked so hard to acquire…
Comment *Canadian citizens are a good commodity for investors and the government ,
house rent more than the per capita monthly income,