When home prices detach from what people actually earn, everyone loses. Here's why even homeowners should care.

Most of the articles you'll read about Canada's housing crisis focus on the same thing: how expensive homes have become. Which is true. But that's like describing a forest fire by talking about how hot it is. You're missing the bigger picture of what's actually burning down.

Here's what we don't talk about enough: when housing becomes this disconnected from middle-class incomes, it doesn't just hurt the people who can't buy homes. It hollows out the entire economy. It drives away the talent our cities need. It kills entrepreneurship before it starts. And it's slowly turning Canada into a country where your parents' wealth matters more than your own abilities.

Even if you already own your home, this should worry you.

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The Mistake We Keep Making

We've probably made this mistake in dozens of articles by now. We assume everyone cares about housing affordability as much as we do. But when roughly two-thirds of Canadian families own their homes, it's easy to think: "Not my problem. In fact, aren't rising home values good for me?"

That logic makes sense if you squint. But it falls apart when you zoom out and look at what's actually happening to the country.

Since the financial crisis, real house prices in Canada have outpaced income growth by about 60%. In the US and most OECD countries, prices and incomes moved together. In Canada, they diverged. And that divergence is creating consequences that ripple far beyond real estate.

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Why Everyone Should Actually Care

Here's the thing about pricing two generations out of home ownership: it doesn't just affect housing. It affects everything. The economy slows. Innovation stalls. Essential services break down. Society fractures.

Let's break down what's really happening.

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1. Your City Is Losing Its Most Productive Workers

When talented people can't afford to live where the best jobs are, they leave. And when they leave, everyone loses.

Research from Deloitte and the Canadian Housing and Renewal Association found that bringing Canada's non-market housing stock up to the OECD average would boost productivity by 5.7% to 9.3%. That's an estimated $67 billion to $136 billion added to GDP, just by letting essential workers live near the jobs where they'd be most productive.

The pattern is stark. A study in the Journal of Urban Economics looked at US migration patterns and found that historically, both high-skill and low-skill workers moved to high-income areas. Today? Only high-skill workers move there. Low-skill workers are actually moving away because even with higher wages, the net-of-housing income is lower than in cheaper cities.

And the American Economic Journal published research showing that housing restrictions in just three US cities lowered aggregate GDP growth by 36% between 1964 and 2009. Think about that. Three cities. 36% of potential growth, gone.

2. Banks Would Rather Fund Mortgages Than Businesses

When housing prices skyrocket, banks make a calculated decision. They shift capital away from business loans and toward mortgages. Why? Because mortgages seem safer.

An IMF study from 2025 found a strong negative correlation between rising house prices and productivity growth. The mechanism is what they call a "collateral channel." Banks prioritize mortgage lending because it looks profitable and secure. Meanwhile, small businesses and innovative firms can't get the credit they need to expand.

Research on US housing booms confirmed this: for every 1% increase in local house prices, there was a measurable drop in investment by non-real estate firms. And the C.D. Howe Institute noted in 2025 that high housing costs act as a "capital sink". All that money servicing massive mortgages? That's money that could have seeded the next generation of Canadian entrepreneurs.

3. Starting a Business Becomes Nearly Impossible

For young entrepreneurs, the math is brutal. You can't afford housing, so you can't build savings. And without equity in a home, you can't get collateral for a business loan.

BDC Economics found that 50% of Canadian business owners report high housing costs are negatively impacting their operations. More critically, high rents force young entrepreneurs to prioritize stable, high-salary jobs just to cover housing, rather than taking the risk of starting a business.

A study in the Journal of Finance found that a $100,000 increase in homeowner equity leads to a 20% increase in the probability of starting a business. Young people locked out of homeownership lose access to this informal venture capital. Renters have significantly lower startup rates because they lack this collateral safety net.

And here's the kicker: 82% of US households are liquidity-constrained due to housing, according to NBER research. Even brilliant people with great ideas can't afford the zero-to-one phase of a startup. In expensive cities, young talent works for established companies purely to cover living costs, rather than starting competitors.

4. We're Running Out of Teachers and Nurses

This one's simple math. When the income needed to afford modest housing exceeds what a nurse or teacher makes, you create a care economy crisis.

In 2023, the national "housing wage" in Canada was $22.40 per hour. That's what you need to earn to afford a two-bedroom rental without spending more than 30% of your income on housing. In Toronto? That number jumps to over $33.70.

Licensed Practical Nurses earn an average of $27.85. Nurse aides make $21.85. These cities have become unliveable for them, leading to high vacancy rates and reliance on agency staff who commute from hours away.

Teachers face the same problem. Over 50% of educators in many districts spend more than 40% of their income on housing. The result? Career switching. Teachers leave the profession for local service jobs that pay more relative to cost of living, just to avoid brutal commutes.

In high-cost areas like Greater Boston, two-thirds of businesses cited housing costs as the primary factor preventing them from recruiting qualified candidates. When essential workers spend more than 50% of income on rent, they experience forced moves, job attrition, and the public services they provide destabilize.

5. Families Aren't Having Kids

The mechanism is straightforward. If young people can't afford housing, especially family-sized housing, they delay marriage, delay children, or skip them entirely.

University of Toronto research found that rising rents since 1990 account for 51% of the total decline in US fertility rates between the 2000s and 2010s. If rents had stayed flat, 13 million more children would have been born.

Another University of Toronto study confirmed that high house prices are associated with significantly lower fertility, with the link strongest in dense urban areas where affordability is most constrained.

NBER research showed that a $10,000 increase in house prices leads to a 2.4% decrease in fertility rates among non-homeowners. While existing owners see a slight increase (wealth effect), the net impact on younger, child-bearing populations is sharply negative.

6. Commutes Are Getting Worse for Everyone

When families have to "drive until they qualify," they end up with crushing commutes. This doesn't just hurt them. It increases traffic congestion for everyone.

Research on Los Angeles found that lack of affordable housing near job centers is directly associated with significantly longer commutes. Low-wage workers in high-cost LA-Orange County have commute distances twice as long as those in more affordable inland areas.

A study in Critical Public Health found that out-of-control housing costs lead to "spatial dislocation," forcing essential workers to move farther from urban centers. Many Canadians now spend 40% to 50% of pre-tax income on housing alone, leaving no choice but to accept gruelling commutes.

Statistics Canada research shows that as families move away from city centers to save on housing, their transportation costs often rise to rival or exceed those savings. Location-efficient housing near transit is cheaper long-term, but the housing crisis prevents families from accessing it.

7. It's Replacing Merit with Inheritance

In a true meritocracy, your success depends on talent and hard work. But Canada's housing crisis is creating what researchers call "patrimonial capitalism," where what your parents own matters more than what you earn.

Research from the London School of Economics found that rising house prices have significantly reduced intergenerational mobility. Success is increasingly tied to "postcode luck" (whether your parents owned property in a high-growth area) rather than your own achievements.

A study in Social Forces confirmed that housing wealth accounts for the majority of correlation between parents' and children's wealth. It's the primary transmission mechanism of advantage across generations.

Statistics Canada found that adults born in the 1990s whose parents were homeowners are twice as likely to own homes as those whose parents were renters. Parental property ownership is now the primary predictor of a young person's ability to enter the housing market.

And CIBC research showed that the "down payment gift" has transitioned from a rare boost to a structural necessity. Over 31% of first-time buyers received financial gifts from family. The average gift size? $115,000. That's a "merit gap" a solo saver can't reasonably bridge through labour alone.

8. Political Polarization Is Getting Worse

Historically, as young people acquired assets like housing, they became more invested in the status quo. Now, high prices are pushing an entire generation toward political alienation and populist extremes.

Research in the American Political Science Review found that rising house prices create divergent political realities. Homeowners become more fiscally conservative and protective of property values. Renters, feeling excluded, pivot toward radical redistributive policies. This creates a clash of interests that fuels polarization.

A study in West European Politics found that in regions where young people are priced out of superstar cities, there's a measurable surge in support for populist parties, both left and right. The sense of being left behind is rooted primarily in the inability to achieve the basic milestone of homeownership.

The United Nations Economic Commission for Europe categorized housing-driven inequality as a primary economic threat to social cohesion. The housing crisis creates a dual-class society, pitting those who got in early against those struggling to survive, leading to social resentment and polarization.

9. Climate Action Takes a Back Seat

When people are struggling to meet basic shelter needs, their bandwidth for long-term global issues like climate change diminishes. There's a Maslowian trade-off happening.

Research published in SGS Bulletin demonstrates that commitment to climate action depends heavily on satisfying lower-order needs like housing and safety. When middle-class households are stuck at the level of survival, their motivation for environmental behaviors gets overridden by immediate economic concerns.

Local Housing Solutions research found that when middle-class residents feel economically threatened, they often adopt "Environmental NIMBYism," using environmental regulations to block new density. This creates a paradox where the housing crisis prompts people to use green laws to prevent the very density needed to lower carbon footprints.

Pew Research data shows that while 64% of Americans say protecting the environment is important, only 34% believe climate policies should be pursued if they hurt the economy or increase costs. There's a ceiling on climate support directly tied to housing market pressures.

10. Homelessness Is Rising

High middle-class housing prices don't just affect the middle class. Housing is a connected ecosystem. When middle-class housing becomes scarce and expensive, middle-income earners outbid lower-income earners for modest housing, who in turn get pushed into precarious situations or homelessness.

Research published by University of California Press demonstrates that high market-rate rents and low vacancy rates are the strongest predictors of homelessness in US cities. When middle-class housing is unaffordable, it increases the rent floor for everyone. For every $100 increase in median rent, there's a corresponding 9% to 15% increase in homelessness.

A study in The Review of Economics and Statistics found that for every 100 new market-rate apartments built, between 45 and 70 vacancies are created in lower-income neighborhoods as people move up the ladder. Conversely, when middle-class housing isn't built, that upward move never happens, and the bottom of the market faces hyper-competition and eviction.

Research in the Journal of Economic Perspectives found that in cities with high median home prices, the safety net of cheap rental housing disappears. This creates a vulnerability threshold where middle-class price spikes directly increase the number of people living on the streets.

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The Current State of Things

As of early 2025, Canada's GDP growth is projected to fall from 1.5% in 2024 to 1.0% in 2025, driven largely by trade tensions but compounded by structural weaknesses including weak productivity and the strained housing market.

Housing starts reached 259,028 in 2025, up 5.6% from 2024. But CMHC says we need between 430,000 and 480,000 new units annually by 2035 just to restore affordability to 2019 levels. We're not even close.

Federal government documents from September 2025 describe the housing situation as dire. Middle-class Canadians are struggling to buy homes and staying in rental units longer, placing additional pressure on rental supply and increasing costs. Canada's rapid population growth has compounded these pressures.

Meanwhile, Toronto essential workers including healthcare workers, teachers, and public safety personnel often cannot afford to live where they work. Average rent for a one-bedroom apartment in Toronto is $2,126 as of April 2025. To afford that without spending more than 30% of income, you need about $85,000 annual income.

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What This Means for You

If you own your home, you might be thinking: "My equity is growing. This doesn't affect me."

But it does. When your city can't keep teachers or nurses or firefighters because they can't afford to live there, your property value doesn't help you. When talented young people leave for cheaper cities, taking their ideas and energy with them, everyone's quality of life declines. When your kids need a $115,000 gift just to enter the housing market, that family wealth you've built gets consumed by the very crisis that created it.

And when an entire generation feels locked out of the basic milestones their parents achieved, that frustration doesn't just disappear. It manifests as political instability, social division, and economic stagnation.

The housing crisis isn't just about housing. It's about what kind of country we're building. One where merit matters, or one where inheritance determines everything. One that attracts talent and fosters innovation, or one that drives both away.

We don't expect you to care about this as much as we do. But we hope you understand why addressing it matters for everyone, whether you own a home or not.