One of the most brutal forms of the crisis of capitalism in Canada is the housing crisis. It is now a veritable epidemic. In virtually every city in the country, we’re seeing an explosion in the cost of homes and rents.
Tent cities are multiplying, as more and more people simply have nowhere to live.
Our leaders are looking for scapegoats. Immigrants are their target of choice. “100 per cent of housing problems” are linked to immigration, says Quebec Premier François Legault. The same kind of rhetoric is echoed by the leader of the Conservative Party of Canada, Pierre Poilièvre.
Even Justin Trudeau’s Liberal government, which usually plays the pro-immigration card, has fallen into this rhetoric and adopted measures to reduce the number of foreign students.
But it is scapegoating indeed. The reality is that the entire Canadian capitalist political class has no solution to the housing crisis. On the contrary, they and their system are to blame.
A problem of supply or demand?
The idea that immigration is the cause of the housing crisis is tantamount to saying that demand is too high in relation to supply, causing prices to rise. This idea may seem reasonable, but it doesn’t stand up to analysis.
While it’s true that there has been a significant increase in immigration in recent years, this explains nothing. The massive rise in housing costs is completely disproportionate to population growth.
Canada’s population rose from 32 million to 41 million between 2005 and 2024, an increase of almost 30 per cent. During the same period, the average selling price of a home almost tripled. It rose from $241,000 in January 2005, to $720,000 in January 2024, with a peak of $836,000 in February 2022.
What’s more, a healthy society should be able to build housing to meet the increased demand. In fact, this is what the proponents of capitalism constantly tell us, that the all-powerful “invisible hand of the market” should balance the market and restore sufficient supply in relation to demand.
But this is clearly not the case. In fact, while in 2023 the population was growing at its highest rate since 1957 (3.2 per cent), the number of housing starts was falling compared to 2022 and 2021.
As the market is unable to regulate itself, many bourgeois commentators propose all sorts of measures to encourage it, such as changes to zoning rules, tax reductions, etc.
But these measures won’t change a thing. They are gifts to capitalists that will only serve to further enrich property developers. The conditions that led to the housing crisis remain untouched.
Massive program
The fact is, we need a massive housing construction program, both to meet demand and to bring prices down.
The Canada Mortgage and Housing Corporation (CMHC) estimated in 2022 that, to restore affordability, it would be necessary to build 3.5 million more housing units than the 2.2 million already planned by 2030. The cost of building such a massive project would amount to a colossal $1 trillion.
But real estate developers don’t want to embark on such a construction plan, and neither do the various levels of government. Justin Trudeau’s meager housing plan, which sets aside a few billion dollars to build a few hundred thousand homes, certainly won’t be enough.
Bourgeois experts blame various factors, such as the high cost of materials and the shortage and high cost of labor.
But the problem goes deeper than that. Capitalists don’t want to build because it’s not profitable.
A good example of this is CMHC’s Apartment Construction Loan Program, a federal low-interest loan program for developers who agree to build affordable rental housing. Since the program began in 2017, which so far has cost the federal government $17 billion, only 46,000 units have been built!
What’s more, a Globe and Mail investigation found that CMHC’s “affordability” criteria was bogus. Only about half the units built with the Loan Program had an actually affordable rent. According to the developers interviewed by the Globe, it’s not profitable to build homes with the aim of renting them out at low rents. “Nobody would pursue the financing,” if the criteria were stricter, says developer Dan Dixon.
For Canadian capitalists, it’s more profitable to keep supply low to sell homes at higher prices and keep rents high.
This is what professor Steve Pomeroy explains in a report titled “Rethinking Canada’s Target for 5.8 Million New Homes by 2030”, of the Canadian Housing Evidence Collaborative: “…developers and builders are not motivated to flood the market with excess supply that would reduce potential sales profits; indeed, their inclination is the opposite—to stall until there is greater certainty and potential for new supply to be absorbed at a higher rate of return on investment.”
This brings us to the heart of the problem. The ruling class doesn’t want to solve the housing crisis because the very causes of the crisis are sources of enrichment for them.
‘Too big to fail‘
As we’ve explained elsewhere, Canadian capitalists are finding manufacturing less and less attractive. The crisis of overproduction is squeezing their profit margins, so they’re looking for more profitable investment channels.
Investing in real estate has gradually become much more attractive to capitalists. The Canadian economy has thus become addicted to real estate over the past 20 years or so.
While the manufacturing sector shrank from a gross domestic product of $225 billion in 2004 to $213 billion in 2023, the real estate services sector exploded from $175 billion to $291 billion over the same period. It has overtaken manufacturing to become Canada’s leading industry—and a completely unproductive one at that.
As a result, a speculative bubble was created: investors bought houses knowing they would increase in value, but then created more demand, which drove up the price even more, which in turn confirmed the value of investing in them.
So, whereas it represented 22.4 per cent of gross fixed capital formation in 2000, residential investment is now a huge part—37.2 per cent in 2020—of gross fixed capital formation in Canada. This makes it the highest rate in the OECD.
Today, large parts of the Canadian economy depend on the real estate sector, from construction to finance, insurance and all kinds of related services.
But this industry is largely built on thin air: on the sale and rental of homes that are often already built. In fact, while activity in the sector exploded between 2004 and 2023, as we have seen, the number of housing starts actually declined, not returning to its 2004 peak until 2021.
What’s more, this industry is largely fueled not by people buying homes with the intention of living in them, but by investors looking to resell these properties at a premium later on or to rent them at an extortionate price. According to the Bank of Canada, investors account for around 20 per cent of home buyers. In Canada’s two most overheated markets, Ontario and British Columbia, this figure rises to 30 per cent and 43 per cent respectively.
The above picture helps explain why those in power are doing nothing about the housing crisis, and why they blame immigrants.
Canada, with its capitalist economy based on private ownership and the pursuit of profit, could hardly sustain a significant drop in house prices and rents.
The huge real estate sector rests on a bubble caused by inflated prices. A clear dynamic of significant price falls could burst the bubble, while investors would be encouraged to sell their properties quickly before prices fall further.
This would lead to a downturn in the real estate sector—the mainstay of the economy as we have seen—and further discourage developers from building homes. This could be the factor that pushes Canada’s fragile economy into a slump.
At the same time, it’s important to remember that almost half of all Canadians own their own home. These homes have gained almost 300 per cent in value since 2005. This means that household wealth is largely tied up in the value of their homes—more precisely, 44 per cent in the fourth quarter of 2023. But this wealth is largely invested in an asset whose value is speculative.
Families who bought a home at an exorbitant price and high interest rate would overnight find themselves stuck with an unpayable mortgage on a house that’s no longer worth as much.
What would make housing affordable for one part of the population would ruin many households.
Above all, the entire ruling class has enriched itself massively on the real estate bubble of the last 20 years. They have no interest whatsoever in reducing the value of housing—which would be tantamount to reducing their own wealth.
Expropriate the big developers and banks!
The ruling class is caught between a rock and a hard place.
On the one hand, the housing crisis is creating ever-increasing anger and political instability—an increasingly untenable situation, as more and more people are unable to afford housing and are thrown out onto the streets.
On the other hand, by trying to act to resolve the crisis, it risks provoking an even greater crisis.
So its only option within a capitalist framework is to play the balancing act of trying to progressively reduce demand by limiting immigration, while progressively increasing supply through meagre investment and changes to taxation and regulation.
Meanwhile, millions of poor and working people suffer in slums, in the stress of losing their homes, or sleeping rough in the streets. To divert attention from their own responsibility in this crisis, politicians like Poilievre and Legault point the finger at immigrants. They present their anti-immigration rhetoric as a simple economic reality, but they know full well what racist dog-whistle they are tooting. This so-called practical solution to the housing crisis won’t solve anything, but it will fuel racism.
Workers must reject this kind of false solution. It’s a smokescreen. These politicians are servants of the same bosses and landlords who pay us starvation wages while charging us astronomical rents.
Canadian and Quebec workers have the choice between continuing to suffer in an insolvable housing crisis, or taking matters into their own hands. The means exist to build millions of homes. Hundreds of billions of dollars are sitting in corporate bank accounts. The obstacle to their productive use is the profit motive and the absurdity of the market economy.
To solve the housing crisis, we need to expropriate the big landlords and landowners, property developers and banks to finance a massive housing construction program. Homes kept empty by speculators must be expropriated immediately to house homeless people. The money expropriated from the bankers should also be used to provide a generous universal pension plan, so that no-one has to depend on the value of their house to have a decent life in retirement.
Ultimately, the housing crisis is a feature of the capitalist system, which must be overthrown if we are finally to live well.
