From Starter Home to Stuck: The Trapped Second-Time Homebuyer

Rising prices, weak equity, and a market that no longer lets families upgrade.

Missing Middle Initiative, Sabrina Maddeaux, and Mike Moffatt

Mar 25, 2026

Canada’s housing crisis is usually framed around first-time buyers struggling to get into the market. But a growing number of Canadians have already made that leap and are now stuck. Couples who bought small condos with the expectation of eventually upgrading are discovering that the path forward has quietly disappeared.

In this episode, Mike Moffatt and Sabrina Maddeaux unpack the rise of the “trapped” second-time homebuyer, households in their late 20s to early 40s who did everything right, built equity, and planned ahead, only to find that larger, family-sized homes are further out of reach than ever. With prices outpacing incomes, policy focused on first-time buyers, and a shortage of suitable homes, the traditional housing ladder no longer works.

What happens when an entire generation can’t move up, even after getting in? And what does it mean for family formation, economic mobility, and the future of Canada’s housing system?

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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.

Mike Moffatt: I’m really concerned about those couples who bought a small condo a few years ago, which they’ve now outgrown, but can’t qualify to purchase a larger home and how it impacts everyone. We hear a lot about the challenges facing first-time homebuyers, but not so much about those who would like to be second-time homebuyers. Now, Sabrina, unlike me, you’re in the same age range as these folks.

Is this something that gets discussed among your circle of friends?

Sabrina Maddeaux: It absolutely does, especially among anyone lucky enough, somehow, to be able to get into a so-called starter home a few years ago during the peak, often a small condo.

I know people who are couples, who are like, We’ll get into the market, and we’ll get that one-bedroom condo right now, just to get in, and we’ll maybe even have a baby. But by the time that child is three or four, and ready for more space, we’ll have enough equity to move into that larger, second family home. But now they’re in a position where they feel they’re stuck, and who knows how long they might be in a small apartment that really isn’t suitable for the family or the life that they envisioned because of the way the market’s gone.

Mike Moffatt: That’s what I think, too. And I believe that governments are ignoring the families and voters facing the second-time homebuyer challenge, which is a critical part of Canada’s housing crisis.

Most of us, you and I and others, are familiar with the challenges faced by young people. They’re living with their roommates, or they’re living with their parents. They would like to purchase their first home, but simply can’t afford the down payment or qualify for a mortgage.

This is a very real, very massive problem, and governments across Canada have policies that attempt to address this. So it’s just the first time homebuyers get a GST rebate.

Now, however, those same governments are ignoring the second-time homebuyer problem. These are people in their late 20s all the way up to their early 40s -usually couples - either have young children, or they’d like to.

They bought that small condo a few years ago with the hope of eventually moving into something with three or even more bedrooms. But those homes remain out of reach, and whatever equity they’ve built up in their current home is not enough for a down payment or to qualify for a mortgage. And I cannot for the life of me figure out why governments are ignoring the families and voters facing that second-time homebuyer challenge.

You are a little bit more politically astute than I am. Do you have any ideas why that might be?

Sabrina Maddeaux: I think it took them so long to come around to the first-time homebuyer challenge that they’re going to need more years to catch up to the second-time challenge. In their minds, the housing crisis is still something that, when they do acknowledge it, affects people in their early 20s who are in more entry-level jobs, and who are really just trying to get into any type of housing, and that’s probably a small apartment or a condo.

And that’s something that they see as easier to fix in many ways, because we do have an oversupply of these shoebox condos and not enough people want them. And then they can say, Well, a unit is a unit is a unit. It’s a lot harder for them to figure out how we build enough family-sized homes for people and family-sized homes that people want, in areas that people need to be in in order to work and not have entirely unreasonable commutes.

That’s a much larger problem, and it’s one they’d rather avoid. On top of the fact that, just by nature of being out of touch with the crisis, not experiencing it themselves, they don’t see how it has now spread into other demographics. And it’s not just young people in their 20s and first-time homebuyers. It’s people all the way up into their mid-forties who can’t find a place to raise a family.

Mike Moffatt: Yeah, it really is surprising how much things have changed in the last 20 or 25 years or so. In the early 2000s, I was in my mid-20s. And for us, the common thinking was that you buy your first home, which may be too small to be your forever home, but you would own it for a few years.

You’d pay down the mortgage, have the price of that home go up a little bit, and then you could sell it. And the difference between the sales price and whatever was left on your mortgage would be more than enough for the down payment on your, quote unquote, forever home. Now, in London, Ontario, where I was living at the time, that starter home was more likely to be a small townhome than a condo unit.

And a high rise. And you and I discussed that in our starter home episode, and we’ll link to that in the show notes. Back then, my wife and I had a lot of friends in Toronto and Vancouver, and they had the same basic idea, except the first home that they purchased was a one-bedroom condo, but that goal was the same. The idea: you make your monthly payments, you have the price of that condo appreciate, then eventually sell it and use the proceeds on a family size home.

Now again, this was the early 2000s. So my experience is over 20 years old. Do you think that same mindset existed 5 or 10 years ago, and do you think it still exists today?

Sabrina Maddeaux: It still did five or 10 years ago. Housing was skyrocketing, and there was a sense of FOMO - fear of missing out. If you didn’t get in now, you never would. And it still seems like if you could somehow just get on the ladder, you were then on the ladder and you’d be able to move up eventually. Now, unfortunately, a lot of those people are stuck.

And quite frankly, when you go to do the math on potentially buying a starter home, and then you think about future planning, it’s very clear, the ladder is entirely broken. It doesn’t work, and there’s no way to even get on it. Or, if you are on it, on that first rung, to move up it. Especially when you’re talking about urban centers or suburbs. Those places where there should be economic mobility, class mobility, and growth doesn’t exist. That has a lot of repercussions.

This model that you describe of people buying condos, planning for them to shoot up in value and then selling them after a few years and then taking those profits and buying something larger, it almost sounds like a Ponzi scheme to me when you think about it.

Was it ever a sustainable model, and doesn’t it require condo prices to rise much quicker than incomes? While at the same time, those larger family-sized homes can’t go up in price too much, or they’d still be out of reach.

Mike Moffatt: I think that is a fair question and a fair concern. Now, I will say that there is a Goldilocks version of this that can work and is sustainable, but it involves condo and starter home prices rising at roughly the same rate as wage growth. So, around 3 to 4% a year. Under that scenario, you can still build equity on a condo or starter home, but a lot of the heavy lifting is done by your monthly payments. Paying down the mortgage, rather than home price appreciation. Now, there have been times where we’ve had this Goldilocks scenario. London, Ontario, from about 2004 to 2014 is one example. Home prices rose, but not too much faster than income. So, the home price to income ratio stayed at reasonable levels around that 3 to 1 range.

Now, of course, that was never the case for the GTA, where it wasn’t uncommon to have condo and family-size home prices have double-digit percentage gains in a single year, at a time when inflation was 2%, wage growth was 3 to 4%, causing home prices to become even further disconnected from incomes. That model was never sustainable. So it’s totally understandable why there was this 15-year period where it seemed that every week the media was predicting the mother of all home price crashes that never came. Because I think we often underestimate how long our economy and society can sustain unsustainable things. Eventually, those things are truly unsustainable.

So we now find ourselves in a situation where we have a lot of young individuals and couples who are trapped in place. They purchased a small condo in a high-rise a few years ago. They don’t qualify for any of the first-time homebuyer programs, but they really need more space, and they don’t have any realistic hope of getting in anytime soon.

So the first step to fixing a problem is admitting that you have it. The other day, you were showing me some new polling data on how Ontarians view housing affordability, and that left me with some optimism that the general public actually gets it.

So what did the data show?

Sabrina Maddeaux: Well, David Colletto and our friends over at Abacus conducted a poll of a couple thousand people on behalf of the Ontario Real Estate Association, and we’ll link to the results in the show notes. Overall, Ontarians ranked “improving housing affordability as one of their top three priorities for the provincial government,” just behind addressing the rising cost of living and improving access to health care.

Now, not surprisingly, the younger you are, the more likely you are to see housing as a top-three issue. But it was a high priority for all groups over the age of 60. Also in the poll, Abacus asked homeowners whether or not they plan to sell in the next five years and, if so, why? Less than a third of homeowners under the age of 45 who want to move in the next few years identified “upsizing” as a motivation.

Roughly a third of this group identified a desire to relocate, and a third identified high property taxes as their motivation. So it would seem that a lot of young people and couples don’t seem to be moving into a larger house in the future, suggesting that the second-time homebuyer barriers we’re talking about are very real.

Mike Moffatt: And I think they are very real.

We’ve put out a few research reports suggesting that extending the first-time homebuyers HST rebate to all buyers of primary residences would help with this very real second-time homebuyers problem. It would help in two ways. First, it would make those second-time homebuyers eligible for the rebate, which, if coupled with a provincial rebate, would save new homebuyers roughly 13% off the cost of a newly constructed home.

But it would also help seniors downsize, which would free up existing family-sized homes, which would indirectly benefit second-time homebuyers as well, because they could go out and buy those homes.

Now, Abacus polled Ontarians on this idea of extending this rebate. What did it find?

Sabrina Maddeaux: They found that overall, 55% of respondents support the rebates, which were announced last year by both the federal and provincial governments, with only 10% opposing, with the remainder either unsure or indifferent. So they are broadly popular with the public, and despite this popularity, only 8% think it’s enough to solve the affordability crisis, and 80% believe it’s either too little or think it won’t accomplish anything at all.

Over two-thirds of respondents believe that the tax rebate should be extended passed first time homebuyers, with 44% wanting to extend it to everybody, and an additional 16% want it extended, but only to seniors who wish to downsize, and another 9% want it only extended to our second-time homebuyers who need to move into a larger home.

So it looks like the general public is largely on your side here, Mike.

Mike Moffatt: So I have that going for me, which is nice.

Now, in general, I always find it an interesting exercise to find out what policy solutions the general public is willing to entertain. And it’s not that I think that respondents to a poll are secretly policy experts or anything like that, or that they spend a lot of time thinking about this stuff. Far from it. But I think it’s useful to know where the public and policy experts like me diverge, and where there is a divergence, I don’t automatically jump to the idea that policy dorks like me need to do a better job of educating the public that we’re right and they’re wrong. I find that often the public has very real concerns that we’re not paying enough attention to when we’re designing policy ideas and policy proposals.

Now, the Abacus poll asked voters a couple of different policy ideas when it comes to housing. And generally speaking, the respondents pretty much like everything that was put in front of them. But they like some ideas better than others. So I would love to get your thoughts on a few that are particularly relevant to building homes.

That would be useful to second-time homebuyers. Now, two related ones received quite broad support. One was increasing provincial investment in infrastructure, and they listed transit, water, and sewers to support more housing supply. And the second one was increasing provincial funding to municipalities to reduce reliance on property taxes and development charges.

So let’s say I’m the pollster. I’m asking you about these ideas. Would love to get your take.

Sabrina Maddeaux: We do have an infrastructure issue, especially in Ontario, and we’ve seen some municipalities say, Oh, well, we can’t build more housing because of infrastructure barriers, whether that’s water or they’ll even say things like parking - I don’t necessarily buy that one. But there does need to be more investment in infrastructure, but my concern is that’s not a solution in and of itself. It’s an element. And we need other broader changes that target both supply and demand to get to affordability.

We also have a lot of municipalities that have been collecting development charges, which are supposed to support infrastructure, but have a lot of those fees now sitting in bank accounts. And where are those actually going, and what are they being used for? So I’d like more transparency there, too, before we just throw more public tax dollars at the issue.

In terms of increasing provincial funding to municipalities to reduce reliance on property taxes and development charges, I’m not a big fan of sending more provincial money to municipalities, especially if there aren’t strings and expectations attached that are actually enforceable, which we’ve seen, they tend not to be.

The property tax situation is interesting, though, because if you look at Toronto, for example, there’s a very strong argument to be made that properties are actually under-taxed and they haven’t reassessed homes in a long period of time. So, looking at the overall balance of who is paying for growth and how that benefits everyone is a broader conversation.

But I’d love to hear your take on these ideas.

Mike Moffatt: I imagine we’ll get some emails about property taxes needing to go up in the city of Toronto. So send those over to Sabrina. It’s a political third rail, but it doesn’t mean that Sabrina is wrong. People might be surprised to hear me say this based on my well-known dislike for development charges, but I don’t love these ideas of simply more provincial funding for the same reasons that Sabrina gives.

So I don’t hate these ideas, but I don’t love them either. I don’t think that just shifting money from one government to another solves a problem. I’d rather see much more structural reform on how we pay and fund the infrastructure, rather than simply shuffling money around from one government to another. I’d much rather see things like funding for roads through charges on cars and water treatment plants, or charges on water bills, rather than having a complex set of cross subsidies that nobody can really follow or understand.

That we should be tying infrastructure to its use. And doing so in a transparent way, because I completely agree, Sabrina, that lack of transparency is a real problem.

Sabrina Maddeaux: We see a lot of subsidies over the last few years that haven’t been working, so I don’t think that’s the solution. If we do have a situation where the province is going to come in and take on more financial responsibility for some of these elements, I think some of that decision-making around zoning and infrastructure also has to be elevated to the province.

When you do have a provincial or a Canada-wide crisis, dealing with this municipality by municipality, especially when local voters and councillors are heavily incentivized to not find a solution and to block further housing. [This system] isn’t working, and I don’t see a scenario where it does work if a lot of the decision-making power stays at that level of government.

Mike Moffatt: I couldn’t agree more.

It’s going to be hard to fight this in Ontario when Ontario has 444 different municipalities, right? So that’s a lot of change that needs to happen. So absolutely, I would love to see a lot of these responsibilities uploaded to the province. Who then could make those changes that could apply province-wide? And you’re having to change one set of rules rather than 444.

Now, interestingly, not the most popular idea in the poll was something you’ve already mentioned: having municipal governments provide more transparency on how they spend development charges and related money. So the public is absolutely with you on that one, because really, who could be opposed to more government transparency?

Now, interestingly, one policy solution that didn’t do as well as I would have guessed was providing down payment support or other assistance to first-time homebuyers. I thought that would be quite popular. And to be fair, it’s still got 55% support as opposed to only about 12% opposed. But as I mentioned, respondents like pretty much everything that was put in front of them. This was one of the lowest levels of support in the poll, and I can’t imagine it’s because of those responses think about the second-time homebuyer problem as much as I do. So, where are you when it comes to first-time homebuyers’ credits and grants, things like that? Are you for them or against them?

Sabrina Maddeaux: I don’t like them either. And I’m someone who would, in theory, as a renter and would-be first-time-home buyer, benefit from them. And I say in theory, because if we subsidize first-time homebuyers, or help them with down payment support, all you’re doing is buttressing demand or increasing demand. So the real solution here is that we do need to see home prices come down in a way that they align with wage growth.

Just throwing around more taxpayer dollars. And then how do those taxes get paid for doesn’t actually result in affordability or long-term sustainability in our housing system for anyone. And at the same time, young people don’t want government handouts. They want to have very good wages. Sometimes multiple jobs actually translate into opportunity, and being able to at least have a chance at the same quality of life as generations before them.

Sabrina Maddeaux: But what are your thoughts?

Mike Moffatt: I’m the same way.

There are a lot of people who ignore the second-time homebuyer problem. And I am totally on board with your criticism that it only bids up the price of existing homes. I do think that this can be addressed in the policy design by making it a requirement of these programs that they can only be used on new builds. That way, you have a supply-side element, but overall, I think the arguments around fueling demand are legitimate. I think that is a concern. And I think there probably are too many policies at both the federal and provincial levels that, either by design or inadvertently, goose demand for resale homes, rather than focusing on building new ones.

Sabrina Maddeaux: Right.

Where I’ve argued for changes in the past isn’t about giving extra credits for buying first-time homes or any homes. It’s more about adjusting the tax system so that people who are renting and don’t have equity and aren’t building equity and won’t have those large capital gains later in life, have similar tax advantages, or not have disadvantages, compared to homeowners. So I’d like to see more of that.

Mike Moffatt: Yeah, absolutely. And I think there is a large cohort of the population who believes that Canada should be going to a system where more of us are renters. If that’s the case, we don’t have the savings vehicles, we don’t have the insurance vehicles necessary to support a population that’s 70, 80, 90% renters. So I think we would have to figure all of that out. And I think that is a very legitimate concern.

I’m going to go back to the poll, because there are two ideas in the poll that received the lowest level of support. The first is allowing more gentle density, such as duplexes, triplexes and small apartment buildings in low-density neighbourhoods, which received only about 55% support and didn’t attract a massive amount of opposition.

And actually, coming in dead last was the suggestion of eliminating exclusionary zoning and encouraging gentle density. It only received 41%. Still, about 13% are opposed, with a lot of people on the fence.

So, Sabrina, does that result surprise you? That the least popular ideas were around up zoning? And how do you feel about creating gentle density in existing neighbourhoods?

Sabrina Maddeaux: I love the idea of gentle density.

I’m for up zoning, but it doesn’t surprise me that there still is a lot of opposition to this, because that’s reflected in the struggle to actually get more up zoning and more supply online. The reality is that there are still a lot of homeowners, mostly older, in Canadian society who are already in their homes and benefiting from the current system and are fearful of change, and also don’t trust their governments to enact change in a way that won’t disadvantage them.

They’re scared, and they don’t want to see this. So that’s part of the struggle, is having politicians be able to sell density to the public in an appealing way, and building that level of trust where density doesn’t mean more ugly buildings or strained resources or negative impacts on the community. There are a lot of benefits that come with more new neighbours, and that’s how it should be pitched.

Mike Moffatt: Yeah, I have to say that these types of missing middle proposals are the exact ideas that housing nerds like me and you love and are in the majority of the policy reports that we release here at MMI. So it does pain me a little bit to see them near or at the bottom of the list, but I get it for all the reasons that you describe. People love the neighbourhoods that they live in, and they don’t want them to change. And I think policy wonks like me need to be mindful of that and find ways to design policies that can benefit residents, such as ones to make it easier for seniors to downsize while remaining in the neighbourhoods they love. But I think it should be a cautionary note for all of us who are supportive of gentle density that we’ve really got to work with the existing residents. We have to hear their concerns and design policy in a way that they don’t necessarily love, but they can at least live with.

Sabrina Maddeaux: I think so much of the conversation around density has centred around younger Canadians, and the benefits for new generations, which would have immense benefits. But also, like you just said, for seniors downsizing, for having workforces within communities, there are tons of economic and social benefits here as well. And those conversations, I think, have been more limited and are just really starting to evolve.

So I’d like to see more of them.

Thank you so much for watching and listening, and to our producer, Meredith Martin, and our editor, Sean Foreman.

Mike Moffatt: If you have any thoughts or questions about how sometimes the general public is right and policy nerds are wrong, please send us an email to the [email protected]

Sabrina Maddeaux: And we’ll see you next time.