Every election, we hear the same promises: more housing, more affordability. But for the next generation, homeownership is slipping further into fantasy.
I’ve been in the real estate business for over twenty years, and in that time, I’ve seen young homebuyers lose hope—and parents wonder why their children can’t afford what once seemed attainable. For decades, the benchmark for affordability was simple: a home should cost no more than four times a household’s income. Today, that number is closer to ten in Toronto and twelve in Vancouver—a level once considered unthinkable.
We’re told this is just “basic economics”—a supply problem easily fixed by building more homes. But this narrative oversimplifies the issue and masks a more fundamental transformation. Homes are not like widgets from a factory. They’re a basic human need and a financial asset that appreciates over time. When a good becomes both a necessity and a financial investment, the usual rules of supply and demand begin to break down.
Housing was reframed as an asset
Contrary to what many suggest, home prices in Canada didn’t explode because cities stopped building. In fact, many metropolitan areas have seen a steady pipeline of new housing. What’s changed is the role that housing plays in our financial system. We’ve moved from one economic reality to another—a full paradigm shift.
In the old housing paradigm, home prices were anchored by incomes. Households saved for a down payment, qualified for a mortgage based on what they earned, and bought homes to live in. That world was governed by an internal logic: prices couldn’t rise far beyond what people could reasonably afford.
But in the new paradigm, that anchor has been severed. Housing is no longer just about shelter—it’s a financial instrument. Prices are no longer constrained by income but driven by capital flows. Homes are bought not just by Canadian households but by investors—some domestic, some global—whose purchasing power is shaped not by salaries but by access to wealth, credit, and leverage.
How did this happen?
This shift began in the 1990s when the federal government, grappling with a fiscal crisis, encouraged households to borrow against home equity to stimulate spending. What started as a strategy to support consumption and home renovations soon evolved into a means of financing the purchase of additional properties. Then came the 2008 financial crisis and, more recently, the COVID-19 pandemic—both marked by ultra-low interest rates. As yields on traditional investments dried up, real estate emerged as a safe and lucrative store of value.
Today, investors account for nearly one in three home purchases in Canada. As their presence has grown, so too has the disconnect between home prices and the real economy. A house is no longer just a place to live—it’s a wealth-generation tool, often wielded by those who already hold significant financial advantages.
This has created two serious challenges. First, it has pushed housing further out of reach for younger Canadians, many of whom no longer see a realistic path to ownership. Unlike earlier generations, they are not just up against peers with similar means—they are up against capital-rich investors whose buying power is unconstrained by income. Second, it has distorted the allocation of capital across the economy. Money that could be funding innovation, productivity, and job creation is instead being poured into the ownership of multiple properties.
We must “rethink what we reward”
Canada has built an economy where the best way to get rich isn’t to invent, create, or build anything—it’s to own houses and wait for prices to rise.
Recognizing this paradigm shift is the first step toward real reform. If we continue designing housing policy for a system that no longer exists, we’ll keep getting the same results: higher prices, deeper inequality, and a generation locked out.
If we want a resilient economy and a housing market in which the next generation has a real shot at owning a home, just as previous generations did, we must rethink what we reward. That means redirecting capital toward sectors that drive innovation, competitiveness, and good jobs instead of propping up a system that treats housing as a shortcut to easy wealth.
Pasalis digs deeper into the shift in housing from a source of shelter to a driver of wealth in his new report, The Great Sell Off. Download it here.
John Pasalis is the President of Realosophy, a Toronto real estate brokerage which uses data analysis to advise residential real estate buyers, sellers and investors.
A frequent commentator on the Toronto housing market and real estate consumer and industry issues, John has contributed to the Globe and Mail, BNN Bloomberg, the Wall Street Journal, and other media, government, and industry organizations. His research has been shared with the IMF and Statistics Canada and cited by the Bank of Canada and CMHC.
John holds a B.Sc. in Economics from the University of Toronto, an MSc in Business and Management Research and a Doctor of Business Administration from the Henley Business School at the University of Reading.