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Housing as a Commodity: The Affordability Crisis in Canada

I've spent half a century writing for radio and print (mostly print). I hope to still be tapping the keys as I take my last breath.

Housing prices have skyrocketed.

Housing prices have skyrocketed.

The Financialization of Housing

“Housing and real estate markets worldwide have been transformed by global capital markets and financial excess. Known as the financialization of housing, the phenomenon occurs when housing is treated as a commodity—a vehicle for wealth and investment rather than a social good.”

That’s a quote from the United Nations Special Rapporteur on the Right to Housing. According to the rapporteur, more than a billion people worldwide are living in inadequate housing or no housing at all because wealthy investors have driven up the price of accommodation.

Affordability Crisis

The Canadian housing market is typical of what’s happened in so-called “rich” industrialized countries.

The Royal Bank of Canada gives us a rule-of-thumb measure of acceptable housing costs: “No more than 30 percent to 32 percent of your gross annual income should go to ‘mortgage expenses’—principal, interest, property taxes, and heating costs . . . ”

Another rule-of-thumb comes from debt management expert Gail Vaz-Oxlade “ . . . you can afford to spend 2.5 times your gross household income. In other words, if you and your pal make $100,000 between you before taxes, you can spend $250,000 on a home.”

The big question is, “Where can you find a home in Canada for $250,000?” The answer is in few places and certainly not in any of the major cities, which is where most Canadians live.

High costs are a barrier to home ownership worldwide.

High costs are a barrier to home ownership worldwide.

The average cost of a home in Canada in December 2021 was $488,000. At the same time, the average hourly wage in Canada was $27.70. That translates into $54,735 a year, so Ms. Vaz-Oxlade’s theoretical couple earns a total gross income of $109,470. The Royal Bank’s 32 percent rule says these people can afford to spend $2,919 a month in carrying costs.

Back-of-the-envelope calculations suggest this couple can carry a mortgage of $380,000. That means that, with a 10 percent down payment, they can afford to buy a property costing $420,000. But, as we’ve seen, that is $68,000 less than the average price in Canada.

Those numbers apply in many other jurisdictions. The International Monetary Fund says house price increases are now synchronized with those in Sydney, London, New York, and other major cities.

Speculators are one factor driving up home prices.

Speculators are one factor driving up home prices.

The Speculators

Property prices in Vancouver have been driven to out-of-reach levels by several factors. During 2016 and 2017, Asian investors, mostly Chinese, pumped a billion dollars a year into Vancouver real estate.

In 2001, the average detached home in Vancouver sold for $369,000. By January 2016, the price had risen to $1.827 million. There has since been a softening of the market as a tax on speculation has prompted investors to look elsewhere for bargains.

But, the blame for skyrocketing housing prices can be placed on many shoulders. Here’s the International Monetary Fund: “Institutional investors, private equity firms, and Real Estate Investment Trusts have been increasingly active in major cities such as Amsterdam, Sydney, and Vancouver as they seek out higher returns.”

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Money Launderers

And then there are the money launderers. In May 2019, the British Columbia government reported that real estate deals worth $5.2 billion in the province in 2018 involved dirty money. A lot of this cash seems to come from Russia through the accommodating hands of banks that don’t ask nosy questions about its provenance.

It is a repeat of the strategy used by Russian billionaires stashing their money away in property in London, England.

It is a supreme irony that people who come by their wealth through criminal activity want to store their riches in countries that operate under the rule of law.

“Housing should provide shelter, not a vehicle for proceeds of crime.”

— Carole James, British Columbia Finance Minister

So Goes the Rental Market

As high purchase prices squeeze more and more people out of owning their own home, the next favoured option is renting. But, there’s a knock-on effect here from the soaring real estate costs.

Economics 101 informs us that as demand increases and supply doesn’t, prices rise. Again, Canada has become a broad example for most Western cities. “For the first time in decades, demand for rental housing is outpacing ownership, driving rent prices higher and deepening Canada’s housing affordability woes (Globe and Mail, May 2018).”

Rental Costs by City

PadBlogger is a service that monitors apartment rents. Here are some average monthly rental costs for two-bedroom apartments in Canadian cities in May 2019:

  • Vancouver: $3,090
  • Toronto: $2,850
  • Ottawa: $1,550
  • Calgary: $1,300

Many of these cities are seeing rental price increases of as much as 15 percent a year. A major reason for these price jumps is a critical shortage of housing built for renting. Another reason is that many housing units sit unoccupied. In 2017, Statistics Canada reported that Toronto had 99,000 vacant units in a city with a population of three million.

Investors don’t want to be landlords. They want to park their money and watch it grow as the value of their property rises.

Up goes the cost of accommodation, so that The British Columbia Non-Profit Housing Association says 18 percent of Canada’s renters are spending half their income on shelter. Financial experts say this is a crisis level for housing costs. But, what are these folks to do? Their next option is homelessness.

Without a Roof

All of the world’s most affluent countries are now experiencing an epidemic of homelessness. There has always been a tiny subset of the population that, for one reason or another, sleeps rough, but this is different.

Here are some numbers from the Homelessness World Cup Association:

  • In Australia, there were more than 116,000 unhoused people in August 2016; that’s a 13.7% increase over 2011.
  • The official count in Japan is a relatively small unhoused population of 25,000. However, an estimated three million people sleep in all-night Internet cafés.
  • In Brussels, the capital of Belgium, a count in 2016 found 3,386 unhoused people; a 96 percent increase from 2008.
  • The National Board of Health and Welfare in Sweden counted 33,250 unhoused people over a single week in 2017.
  • More than 40 million Americans were living in poverty in 2017, according to the United Nations, and, of these, 550,000 were unhoused.

Of course, these are among the world’s richest nations. The problem is far worse in poor countries.

This is the Bidonville district of Paris.

This is the Bidonville district of Paris.

Bonus Factoids

  • The Economist estimates that the value of all homes worldwide is about $200 trillion; that’s nearly three times what all publicly traded company shares are worth.
  • To match the rising housing costs, many people are crowding together to share the burden. This is not a good plan, but for some, it’s unavoidable. There are health concerns associated with overcrowding, along with a lack of privacy and the increased likelihood of conflict. The British charity Shelter adds that “Cramped living conditions harm family relationships, negatively affect children’s education and cause depression, stress, and anxiety.”
  • According to the Office of the United Nations High Commissioner for Human Rights:

"International human rights law recognizes everyone’s right to an adequate standard of living, including adequate housing. Despite the central place of this right within the global legal system, well over a billion people are not adequately housed. Millions around the world live in life- or health-threatening conditions, in overcrowded slums and informal settlements, or in other conditions which do not uphold their human rights and their dignity. Further millions are forcibly evicted, or threatened with forced eviction, from their homes every year."


This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2019 Rupert Taylor

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