July 2, 2025

Why Canada’s Housing Crisis Is Worse Than the U.S.

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Canda's Housing Crisis

Housing affordability is reaching a breaking point across much of the developed world—but nowhere is the problem more severe than in Canada. While Americans often point to cities like San Francisco or New York as unaffordable, Canadians are grappling with something much larger: a housing market that has become a dominant economic force, a speculative asset, and a barrier to long-term financial stability.

Let’s break down what’s happening—and why it matters for more than just Canadians.

Savings Down, Debt Up: The Broader Economic Backdrop

Over the last two years, personal savings have fallen sharply while consumer debt has exploded to record levels. Job insecurity, gig work, and sector-wide layoffs have made it harder than ever for the average worker to gain financial traction. Meanwhile, asset prices—especially homes—have climbed far faster than wages or economic fundamentals would justify.

The result? A growing wealth gap between asset owners and wage earners, and an economy increasingly tilted toward short-term speculation instead of long-term growth.

Canada’s Real Estate Bubble: Why It’s So Extreme

Canada’s housing crisis isn’t just about expensive cities—it’s systemic. Take Vancouver, for example: average home prices are returning to their previous peaks despite stagnant wages. In fact, Canadian wages are significantly lower than U.S. wages, yet average home prices are far higher. That’s a lethal mismatch.

One key reason is Canada’s reliance on real estate. The sector accounts for 40% of all capital investment in the country—double the 20% figure in the United States. And unlike the U.S., where housing is influenced by other powerful industries like tech, Canada’s economy leans heavily on real estate itself.

Add in immigration-fueled population growth, underbuilding, and land banking by investors and wealthy immigrants, and you’ve got a perfect storm of demand pressure without corresponding supply.

A Tale of Two Cities: Seattle vs. Vancouver

To understand how stark this contrast is, compare two similar cities: Seattle and Vancouver. Despite being neighbors with comparable populations and West Coast cultures, Seattle’s median household income is more than twice that of Vancouver. That means Americans in Seattle can afford far more relative to housing costs than Canadians in Vancouver.

Meanwhile, adjustable-rate mortgages in Canada are wreaking havoc on household budgets. As interest rates rise, families are seeing their monthly payments double or even triple—something U.S. homeowners have largely been shielded from due to fixed-rate loans.

What Happens When Real Estate Dominates an Economy

Canada’s real estate dominance has crowded out investment in other industries. Unlike the U.S., which has birthed tech giants like Apple, Microsoft, and Nvidia, Canada’s largest companies have a combined market cap smaller than any one of those firms. That means fewer high-paying jobs and fewer opportunities for innovation or entrepreneurship.

High housing costs are also driving people away. In 2022 alone, over 126,000 Canadians relocated to the United States, a sign that housing affordability is becoming a cross-border issue.

Zoning, Policy, and Demographics: How Canada Got Here

Canada’s protected land, restrictive zoning laws, and resistance to density have all limited new development, especially in major cities. And while the country avoided the 2008 housing crash that reset U.S. prices, that lack of a correction has only emboldened investors and kept prices inflated.

Skilled worker and student visa programs have attracted high-income immigrants—but without enough housing to meet demand, prices have continued to soar. And much of the housing that’s being purchased is treated not as a home, but as a hedge—a store of value rather than a place to live.

Long-Term Risk: A Fragile Foundation

Household debt is at record highs. Interest rates are rising. And housing now consumes such a large share of the Canadian economy that any correction could be catastrophic. The system isn’t just stretched—it’s brittle.

For families, that means more income going to housing, and less to everything else—education, healthcare, starting a business, or simply saving for the future. And for the country as a whole, it limits growth, competitiveness, and innovation.

A Global Problem, But a Canadian Extremity

Canada isn’t alone. Housing affordability is under strain in cities across the U.S., Europe, and Australia. But Canada’s unique mix—heavy immigration, low wages, speculative demand, and an overreliance on real estate—has created one of the most acute housing crises in the developed world.

Looking ahead, countries that treat housing as shelter rather than speculation may have an easier time correcting course. But without structural reform, Canada could face decades of economic stagnation, political unrest, and a brain drain as its young workers and entrepreneurs head elsewhere.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

Author

  • D. Sunderland

    We created How Money Works to show what is really happening in the world of finance. As someone that has worked in both private equity and venture capital, I have a unique perspective on the financial world

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