Rental and purchase housing unaffordability will be the top-of-mind determining factor in our next provincial and federal elections. The federal political parties are indistinguishable when reviewing their respective solutions. None understand the core fundamental causes of unaffordability, nor do provincial housing ministries and CMHC.

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Who’s driving unaffordability? All tenant advocates and most politicians and media blame the obvious culprits: landlords and investors. But who really benefits? Who stands to profit most from increased prices? Follow the money.

Ongoing operational costs include:

Cost Amount Who profits most
Property taxes 15% to 20% of income Government
Electricity 2% to 2.5% of income Mostly government, some private
Water-sewer 2% to 2.5% of income Government
Gas 0.5% to 1% of income Mostly government, some private
Carbon tax 20% of annual gas bills Government
Corporate (passive) tax 50% of annual profit Government
HST 13% of end user purchases Government
CRA amortization Lengthy cap/ex schedules Government
Mortgage interest 10% to 20% of income Lenders, especially banks
Property insurance 2% to 3% of income “Profiteering” insurance companies
Capital costs Varies, paid from net profit Contractors
Repairs, Maintenance $300 to $450/unit (4% to 5%) Contractors
Annual inspections Fire, appliances, detectors Government-mandated
Bad debt Varies Government-denied/delayed justice
Other operation costs 38% to 42% of income Government

Notes: 33 per cent of Toronto’s $11.8-billion revenue comes from property tax. Missing middle housing corporate income tax is 50 per cent while large operators (five or more employees) are taxed around 13 per cent. Maintenance costs of aging rental properties are between $300 and $450/unit but CMHC applies $850/unit, which substantially decreases property value and torpedoes many financing deals. Ontario’s zero-per-cent 2020 annual rent increase wiped out $2.3 billion in rental housing equity used in part for property maintenance and upgrades. A 2020 National Apartment Association survey reported that half of rental revenues are mortgage payments and property taxes and both of these are inflexible and must be paid to avoid powers of sale and foreclosures.

One-time costs include:

Cost Amount Who profits most
Capital gains tax 25% of appreciated profit Government
Recoverable CCA Varies, repay all depreciation Government
Mortgage insurance 1% to 4% of mortgage value Government (for-profit CMHC)
Land transfer tax Varies (2.5% of purchase price) Government
Development charges 10% of purchase price Government
Municipal delays Opportunity costs Government
Cash-in-lieu 10% to 20% of site value Government
Eviction suspensions Varies estimate 5% to 10% Government
LTB delays Wide range of losses Government
Professional tenants Wide range of losses Government
Speculation tax ON 15%, BC 2%?, PQ 20%? Government
Vacancy tax ON 1% of assessed value Government
Renoviction tax Varies Government
Million $ home tax Varies Government
Zoning variances $4,000+ Government
Stress test Locks out 200,000+ buyers Government
1st-time home buyer incentive More competition Government
Real estate fees 1% to 5% of purchase price Realtors
Mortgage brokering 1% of mortgage value Mortgage brokers
Lawyer fees Varies, not consequential Lawyers

After a lifetime of servitude to providing rental housing, government siphons 25 per cent of a property’s profit and demands that all depreciation previously taken must be repaid. The amount varies but can be 20 per cent of profit from a sale. Toronto’s land transfer tax doubles Ontario’s, which increased 560 per cent since 1998. Ontario was formed in 1867 but 87 per cent of its net public debt accumulated since 1990. Ontario’s debt is higher than 168 countries including Russia and increased 1,000 per cent in just 30 years. First-time buyer incentives add more competition to ever-dwindling housing supply.

Other government- and lender-mandated costs include home inspection, property appraisal, title insurance, building insurance and condo reserve.

Other unaffordability costs and influences include land prices, land services (utilities, roads), supply chain choke points, construction material (increased two to four times in one year), construction labour and crime rate.

CMHC’s new Select points-based affordability program is based on the same antiquated and fatally flawed income-to-price ratio of the past 50 years that has ultimately led to Ontario losing 106,000 affordable rental housing units between 2020 and 2026 while Toronto eliminated 1,100 uninhabitable affordable units in 2019.

All political parties essentially proffer “tax the culprits,” supposedly to reduce demand. Taxes do nothing to dissuade investors and speculators, who aren’t the real culprits in any event. These taxes are added to the cost of doing business and simply passed on to the next buyers, thereby forever increasing unaffordability.

It’s no coincidence that the two Canadian provinces with the highest rental and purchase unaffordability rates are also the ones with the highest level of government interference in the housing industry: rent control, brutal anti-landlord and tenant-biased legislation, and a plethora of other disincentives to building new housing and upgrading existing housing.

The money trail of unaffordability leads straight back to the supposed steward of housing affordability. Almost all government housing-related income and penalties are based on the value of property. The higher the property value and rent rates, the more income it generates for government. Not only is it a fundamental conflict of interest, but it’s also a paradox: government (and banks) cannot afford affordable housing.

If government harnessed its deflection and misdirection skills to addressing unaffordable housing or even simply stopped tampering with forces of which it has little knowledge and no control, the housing crisis would have been averted years ago.


  1. I am so sick and tired of the immigrant bashing . Most if not all of the statements are untrue People don’t even understand the difference between immigrants, refugees and asylum seekers. I am an immigrant. The only government “hand out” I ever got was maternity benefits through EI (always shorter than entitled since my employer asked me to come back early) Since them my husband, my kids and I have paid millions in taxes. Pretty good deal for Canada. Shameful !

  2. Absolute insane article. Banks don’t even collect interest on most mortgages as they are securitized. It’s private investors who own those securities that collect interest. It is true that the government contributes to increasing housing prices but not the way people like you think. It has nothing to do with taxes and everything to do with a) mortgage securitization and b) housing being the most important pillar of Canadian GDP. If you really wanted to ‘follow the money’ you’d be talking about the IMPP that was instituted during COVID 19, or quantitative easing (in which case the BOC purchased nearly $10 billion of CMB outright from the CMHC, flooding the mortgage market with liquidity). But you just wants to blame taxes so that he can make more profit as a property holder and landlord.

  3. Apparently Chris, society is such today that the use of theword “profits” istaken literally to mean net revenue as opposed to its other meaning, ‘benefits”

    Not that I agree with all of it but the bottom line is, government decides what it needs in revenues and raises it – if they decide they want a nice fleet of shiny new land rovers instead of a Toyota, they build it into budget and tax accordingly – not so easy for a tax payer wanting a new land rover.

    It has never been government’s mandate to decrease budgets. So yes, they benefit. Land transfer tax is a prime example, municipalites and provinces really have no clue how many houses will trade hands every year or at what value, and in a year like last year with obscene price increases and where a significant number of properties were sold twice within a year, that windfall is always somehow absorbed into governmental expenses.

    It’s no different to people making more income and spending it more generously but where it is the propensity of most people to sock away some of the additional income, governments just spend it – they know nothing about rainy days.

    The financial illiteracy to not be able to understand that basic fundamental is simply staggering.

  4. I’m not sure I understand how the math in this article supports the premise that the government is invested in keeping real estate prices high/unaffordable.

    Most of the government revenue listed in the article is calculated as percentage of “per unit” prices. Why would the government care whether they make 10% on 1 unit worth $500,000, or 10% on 5 units at $100,000 each? Logically they would rather have 5 units because more individuals will reside in 5 units than in 1 unit, and the government collects other revenue on “per individual” basis, such as sales tax. The government would net more money by having more affordable housing and therefore more people.

    Having high/unaffordable housing costs also puts the market in stasis. People who own homes but want to move, can’t. The cost of upgrading is too high. This means there is much less liquidity in the market because more owners decide to stay put. Again, the government would make much more money on sales tax, land transfer tax, etc. if more homes changed hands more often.

    The basic problem is that more people want to own homes than there are homes to own. The government is asked to do something about this, but it’s not really possible. The government can’t magically create 200 acres of land in the middle of a city, and then magically create 1000 new homes on it. The only thing the government can do to “cool down” the real estate market is to impose rules that exclude more potential buyers from being able to purchase homes, so the number of people who could by a home decreases to the point where it approaches the finite number of homes that are available.

    What is needed is a supply of homes that approaches or meets the demand for homes. The only thing that any government could do that would achieve this (within the laws of physics) is to build transportation infrastructure.

    The way to solve the gap between the number of homes and the number of people who want homes is to expand the practical radius of the suburbs by providing good, efficient transportation infrastructure.

    Transportation infrastructure that allows people to commute practically from farther away allows people to live practically farther away from their workplace. We can’t “create” land to put new homes on, we have to put homes on the land we have and find a way to make the commute from that land to the workplace efficient and practical enough to make those homes work.

  5. Chris, well done!!!
    You have shone a spotlight on the culprit.
    What you did not mention is that the artificially low interest rate policy of the past decade or so have made cheap money available for a whole generation to afford a lifestyle far better than any previous generation – at the expense of their elders. Most do not realize or appreciate it. Seniors who have worked hard all their lives and paid rates in “the teens and twenties” points have been lucky to get even 2% without going into risky investments. The savers have not been able to even keep up with inflation and are supporting everyone else’s lack of self-restraint or drive.
    Government will use your money to buy their votes.

  6. The inflation of real estate sales prices is caused by foreign money much of which may be laundered and the unwillingness of government to control it. It’s only logical that Canadians with cash will then buy on speculation of more money immigrating to Canada and add to the problem. There is a solution for both. I don’t see our government, bankers or our own industry care to implement those solutions.

    • Where are the 85,000 expanded new invitees to immigrants going to live except at the Hilton at high prices and food brought in from special restaurants so the immigrants are able to eat familiar foods from their homeland, all of course paid for by the government. The immigrants will eventually find jobs, pay taxes, buy houses often living 12 to a house designed for four, removing lawns to accommodate four or more land rovers and Mercedes, and provide for govt land rovers and even drive one themselves, and managing to often send money back home. It’s an amazing system.

  7. An interesting look at the situation. Obviously, a bit of an oversimplification of a very complex issue, but given the author only has one page, he made his point well. I believe he is asserting that government may very well be causing and/or sustaining the situation for financial benefit.
    The counter arguments have been made that government officials are elected, and therefore, working in our best interests, hence the public benefits the most.
    It was also implied by Richard (correct me if I am wrong Richard) that lower taxes benefit business more, hence an implicit bias.
    What to believe, what to believe?

    In recent years, I have wasted far too much time in study of governments, democracy in general, and our governments specifically. Those studies have led me to conclude that Chris’s assertions quite possibly may have some validity. Try and take the time to find and read a synopsis of The Republic by Plato (the entire work is too long and difficult to read) or search for Plato’s criticisms of democracy. It will be hard to believe this was written 2500 years ago and not 2 years ago. It is disturbingly prescient.
    Another good read, and very recent (2019) is Democracy in Canada by Donald J. Savoie.
    After reading these two works, it won’t be as difficult to conclude that our elected representatives may actually be involved in something like this. Unselfish service to the electorate and the greater good is fast becoming wishful thinking.
    Additionally, with the unprecedented deficits our governments are racking up, they desperately need money. When we add in the well-documented hard shift to the left of most Canadian political parties as of late, this all becomes more believable.

    The evidence is almost overwhelming that our governments have given up on good government, and their default answer to every problem is to tax it. This has the triple benefit of good publicity (tax the bad people), increasing revenue, and not requiring deep reflection and creativity around an issue.

    Finally, regarding the comment on the bias about who benefits from lower taxes, the very foundational basis of the liberal democratic principles our nation operates under is the supremacy of the individual and not the state (this is currently being eroded very quickly). It is government’s duty to operate under as low of taxes as is reasonably possible. I think the argument is fair that they have failed in an epic manner as of late.

    • I’m not sure what your point would be. Are you suggesting that investing in REITs are a bad thing and that pension fund operators shouldn’t invest in REITs? To qualify as a Real Estate Investment Trust (REIT), a company must have most of its assets and income involved in real property investments AND it must distribute at least 90% of its taxable income to shareholders annually in the form of dividends.

      in principle, investing in REITs could be a good part of a retirement planning strategy and many pension funds seem to think so.

  8. Very slanted article, in my opinion. Banks/lenders/builders and investors profit the most, and what service do they provide for the greater good with their profits? Well, they do hire people and provide dividends to investors. Not that big a sector, right?

    However, government provides services for all of us, and there are too many to list. But top of mind are healthcare, roads, police/emergency services.

    Sure, let’s reduce taxes; but, honestly, who benefits the most from that?…circle back to the top and read again. :)

    • I disagree. I never said government shouldn’t receive funds to pay for essential services.

      The issue isn’t that government makes money from real estate in order to provide essential services and I never mentioned that we should reduce taxes.

      Notwithstanding that, some taxes are short-sighted, poorly conceived or simply misdirect the public’s attention from the true issue, which is much more difficult for government to solve.

      One of the big issues of unaffordability is that government at every level demonize housing providers and investors and blames them for housing unaffordability rather than focusing on solving the “real” issue, which is a critical shortage of housing inventory and how to increase supply.

      Many of the legislative and social inequality issues disappear when buyers and renters have a choice of where to live. Competitive pressures will push cost savings (affordability) all the way back down the supply chain and ensure the best value available.

      The issue is also the hypocrisy of government blaming flippers, investors, speculator and providers for the rapid increase in housing, and using those phantom culprits to justify additional tax schemes that have little to do with affordability. I’d argue that almost every housing buyer and renter has no clue as to just how much money the government generates from housing. The buyers/renters believe that the enormous profits that real estate generates all goes into the pockets of the “haves”. My article was intended to point out that it’s not true. The larger portion of real estate property wealth generation goes to government and the gap between the haves and the have-nots was created by failed government housing policies, not investors, homeowners and other so-called infliuencers.

      Government making money from housing is in of itself not bad. However, adding any tax, fee or other levy such as vacancy tax, speculation tax or foreign ownership tax simply adds more cost to any property. These costs will be added on to the purchase price as the cost of doing business, and the buyer will end up paying it … so how do these taxes improve affordability? Buyers and renters pay the tax, not the sellers, speculators, etc.

      Taxes, fees, etc. will NOT curb demand. Home ownership is an intrinsic belief and goal of most citizens. You can’t tell a population for 60+ years (since after WWII) that buying a home is a good investment and then suddenly say, “it is different now” because everyone is “financializing” homes.

      Pointing fingers at lenders is a slanted view too. Without lenders, arguably 95% or more of home buyer hopefuls wouldn’t stand a chance of home ownership in their lifetime. Lenders also run all the credit cards, which have its own set of pros and cons but which nevertheless are intrinsic to society today.

      Credit and debt empower dreams to become reality. What other items can you buy where you give 5% to 10% of the value of the item but you obtain 100% ownership and possession of the item? Perhaps cars and a few other high-ticket items but no one’s talking about the financialization of vehicles.

      Not the same thing? Actually, financialization of any item is exactly the same thing. The difference with housing is that most people believe they are entitled through “human right” to a roof over their heads. Morally and scoially, there’s no argument that can dismiss that. In reality though, there’s a physical asset involved that costs a lot of money to provide. The ONLY way ANYONE will provide a physical asset like a rental unit or home is if there’s an upside to doing so.

      Every employee that works for someone else is looking for an upside in their job salary. They want to make more money than the amount they require to meet their living costs. How is that employee’s upside (essentially … gross profit) any different than investing in a stock or investing in a real property in order to receive an upside for the financial, legal and emotional risks they took?

      This article is about government not owning up to their large part in creating housing unaffordability and how doing so would monumentally impact their revenue streams. It’s hard to expect government to decrease housing unaffordability when it’s not in their short-term best interests to do so.

  9. Dear Chris:
    Not only is an EXCELLENT article, you also described the situation in a nutshell when you said: “The higher the property value and rent rates, the more income it generates for government. Not only is it a fundamental conflict of interest, but it’s also a paradox: government (and banks) cannot afford affordable housing”.

    I’d say that they are just doing a show before elections. If they REALLY want to give even a “bit of help” to buyers and having an IMMEDIATE effect, they could eliminate BOTH LTT’s for at least two years. But… I’d be pretty sure they won’t do that simply because it’s easier being generous with other people’s money.

  10. So when the article says the government, who are they really speaking about. The article makes it sound like the government is some evil machine that just takes the money . The government is comprised of elected officials , they are representative of the public that elected them. Therefore the article should state that the public profits most from unaffordable housing.


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