These Changes Can Help Make Homes Affordable for Young People

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Missing Middle Initiative, Mike Moffatt, Sabrina Maddeaux, and Meredith Martin

Jan 28, 2026

Homeownership rates for Canadians under 40 are collapsing with no indication that they will rise anytime soon, despite prices being down from their 2022 peaks. In this episode of the Missing Middle’s Classonomics podcast, Mike Moffatt and Sabrina Maddeaux unpack why the dream of homeownership is slipping out of reach for young Canadians, and why the federal government can’t wash its hands of the crisis. From immigration and population growth to tax policy, development charges, and monetary policy, they explain how federal decisions have shaped today’s affordability crunch.

The conversation goes beyond first-time buyers to examine the breakdown of the entire ownership ladder, from dog-crate condos to second-time buyers and downsizing seniors. Drawing on new research and concrete policy proposals, they outline what actually went wrong, why prices remain stubbornly high, and what the federal government could still do to restore a realistic path to homeownership.

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

Mike Moffatt: So, Sabrina, I have a mental list of tropes I hear over and over on Canadian housing policy, and one I hear often, particularly from federal Liberal supporters, is that the federal government doesn’t really have a role to play when it comes to the housing crisis. Ultimately, it’s a provincial and municipal responsibility.

I’m not a fan of that argument, but I’d love to get your take.

Sabrina Maddeaux: It’s so weird that federal Liberal supporters would say that when the federal liberals keep putting out affordable housing plans. But no, that’s not true.

You know what? Municipalities and provincial governments have a huge role in the affordability crisis. And they have failed young people, especially when it comes to supply and zoning. But the federal government absolutely has a role to play and blame to go around when it comes to affordability and the dream of homeownership essentially being dead for your average young Canadian.

Immigration policy is probably the biggest one, because it impacts the demand side of the equation. And we simply had unsustainable immigration surges over the last several years. And I would argue we continue to completely outpace our ability to build homes. So that’s where we’ve especially seen rental prices surge as well. But the federal government also has responsibility when it comes to tax policy.

If you look at the Bank of Canada and what they’ve done with monetary policy, especially during the pandemic and quantitative easing, that also surged asset prices, particularly homes. The federal government can also have a role when it comes to things like foreign buyers and how investors are treated. That’s tax code. So there are a lot of things they can do, particularly on the demand side.

What’s your take on that?

Mike Moffatt: Yeah, I absolutely agree. If somebody wants to make the argument that the provincial governments have more policy levers. Yeah, absolutely. But I think what is unreasonable is when people wash their hands and say, the federal government really doesn’t have a role here. Because you’re absolutely right. There is tax policy and monetary policy.

The fact that we have something called the Canadian Mortgage and Housing Corporation that has existed in some form since the 40s. Even before then, there was wartime housing and so on. You have a federal housing minister, you have a federal agency that puts itself in charge of housing. You have all of these other policy levers.

So I think it’s just simply incorrect to say that the federal government doesn’t have a role in creating the problem, but also doesn’t have a role in solving it. They absolutely do.

Sabrina Maddeaux: I would add, even from a comms perspective, the housing crisis isn’t localized to any one municipality or any one province anymore. It’s truly a national crisis. And where the provinces do have responsibility, I think then the federal government has also a responsibility to step in and communicate to Canadians that you need to ask your city councillors or your premiers to step up and tackle this, so that they have a better understanding, especially Canadians who might not understand different jurisdictions.

Who is responsible for what? Speaking of which, you do have a report out this week called A Blueprint to Restore Homeownership for Young Canadians. Can you give us a quick 30-second elevator pitch about this report?

Mike Moffatt: Absolutely. So we’re really excited about this one. And it does three things. First, it shows that homeownership rates have absolutely cratered for people under the age of 40. And basically, the younger the [cohort], the larger the decline is.

So, for say, 25 to 29-year-olds, there’s a big decline over the last ten years. We think this has probably grown even larger.

This data comes out every five years with the census. This is a census year, we think, in 2026, that we’re going to show an even bigger drop. And it acknowledges that there are dozens of reasons why this happened.

And I know I could give 37 reasons, and I will get flamed in the comments for not mentioning the 38th, but we focus on four things that we think went wrong that the federal government can fix.

First is that housing starts have not kept up with population growth, something you and I have talked about; you just mentioned it about a minute and a half ago.

Second is that there’s been a shift toward building fewer family-sized homes and more one to two-bedroom units. So even when we say we’ve built 200,000 homes this year, as we did 15 years ago, if those homes that we’re building today are smaller with fewer bedrooms, we need more of them. We can actually get misled by housing starts numbers.

Third is that there has been a reduction in housing starts intended for the ownership market. So we’ve seen this big shift towards building purpose-built rentals. And we need more purpose-built rentals, but that comes at the expense of building ownership homes.

And fourth, we have seen for a variety of reasons, investors buy up large numbers of homes that historically had been on the ownership market and have converted them into rentals. So while that can be beneficial and is beneficial for the rental market, it reduces the number of ownership opportunities for young people.

So based on those four things that are happening, we give ten policy prescriptions on how the federal government can address those issues.

Sabrina Maddeaux: The key thing I hear there is that so often we just hear about housing starts or units, as if all types of housing are created equal, when there are so many different types of housing. And there are types that we’re probably doing okay on, and then types that we are severely lacking. Especially when it comes to that missing middle for families and single detached homes, and certainly also any sort of rentals or even condos that are large enough to have families in.

And so a unit or a housing start shouldn’t be treated equally because it doesn’t really capture the landscape of where those gaps are.

I’d love to hear a little bit more about the point around housing starts and population growth. Is it simply about our population growing rapidly due to immigration, or is there more to it than that?

Mike Moffatt: The population growth side is incredibly important. And I think you can argue that it is the dominant factor, but it’s not the only factor.

If we go to the turn of the century, about 25 years ago, across Canada, we used to build about 100,000, what’s called freehold ownership homes. So those are homes intended for ownership, but they’re not condos; single detached, semi-detached townhomes. And that’s dropped steadily over the last 25 years. It’s been declining by 3% to 4% a year. Particularly in Ontario, we can look at things like development charges and the Greenbelt and things like that. So we’ve declined to about 80,000 a year. That has dropped by about 20 to 25%, despite the fact that our population is growing much faster than it was 20 to 25 years ago.

And none of that’s an accident that provinces and municipalities deliberately put in policies in place to try and shift the types of homes you’re building away from sprawl, for lack of a better term, towards high-rise apartments and those being a combination of condos and rentals. What we did was we looked at a ratio, and we said, 25 years - 35 years ago and so on…

We consistently built about 30 to 35 of these freehold ownership homes for every 100-person increase in the population. Canada’s population grows by three people. We add one of these homes. In recent years, that ratio has gone down to 12.

Basically, for every eight or nine adults, we’re adding one of these homes. And that is due to a combination of population growth, but also the fact that we’re building fewer of them. If you do it on a per-population-growth basis, we are building two-thirds fewer of those homes than we used to. And that’s the reason why you can’t find a family-sized home.

Back when my wife and I, 20 years ago, wanted to buy a home in London, Ontario, we might have been competing with one other buyer. Nowadays, you’re competing with three or four or five buyers who want to buy that to live in, and then maybe also competing with an investor or two as well. That’s driven prices up. And the thing is, if you have 10 people who all want the same home, only one of them is going to win that competition. The other nine are going to go home unhappy.

Sabrina Maddeaux: Those are some truly wild stats. And what’s new to me there is we talk about these gaps and how there’s been a huge shift to dog crate condos and very small units, and these gaps just didn’t happen by accident.

Dog crate condos were part of what was planned for and were actually incentivized by different policies. And you mentioned that the shift away from family-sized homes and towards those small apartments and high rises was due to provincial and municipal policies.

Now, can the federal government do anything to address this?

Mike Moffatt: This one is tricky. And to be clear, the report makes it clear that a lot of that shift is due to the provinces and municipalities, not due to the federal government, but the federal government can still address that. Now, part of it is just immigration reform. So you don’t have as many people competing, for the same number of homes, but it’s also beyond that.

It’s also just having better planning. It’s not just about the sheer numbers, but it’s letting provinces and municipalities know that in the next five to 15 years, this is what we’re planning for population growth. Because even if you had provinces and municipalities that wanted to do the right thing, who wanted to make sure that infrastructure, zoning, land use, all of that was keeping pace with the population. If they don’t know how fast the population is going to grow, or the federal government just decides to keep ratcheting up or down that dial, they can’t plan for it.

It’s not solely about the numbers, but it’s also that the federal government has to be more transparent around the decisions it makes for population growth and plans accordingly. So that’s the first thing they can do here.

Second thing is they could just build homes directly through, Build Canada Homes, and they’re doing that. But part of our concern with Bill Canada Homes is that they’re going to build just rentals. But second of all, they’re going to build a bunch of small units, because it’s cheaper and it saves the government money that way. We think they should be building at least some family-sized ownership options.

And then the third thing they can do, the big thing they can do, is reduce taxes.

So right now, a development charge on a home to pay for infrastructure gets buried in the final cost. You’re going to buy a home. You don’t see it. I don’t see it. The buyer doesn’t know how much they’re paying. Which causes a transparency issue because it’s buried in the final price. HST, GST, PST, land transfer taxes and so on are layered on top of that.

So you might have $150,000 in development charges on a new Toronto home. Then you’re paying 5% GST, an 8% PST, a 2% provincial land transfer tax, and a 2% municipal land transfer tax. So you’re paying a 17% tax on that $150,000.

So what we say is take the development charges off of homebuilding and don’t bury it into the final price.

Instead, charge it as a separate amount that’s on the bill. It’s transparent, and then exempt it from taxation. It’s one thing for municipalities to say, Hey, Sabrina, we need a few bucks so when you’re moving into a new home, your kids have a library nearby. I think that’s a fair thing. But why are we charging you sales tax for your contributions to a local library?

It’s not fair to new home buyers to have this tax on top of a tax.

Sabrina Maddeaux: Development charges have so many issues in and of themselves, especially how high they are these days. But the fact that essentially we’re taxing a tax on young people is just incredibly enraging.

Now, your next set of recommendations has to do with making it easier for renters to become first-time buyers by making it easier to save for a down payment, which is huge. Because, especially as interest rates come more back in line, it’s not always the monthly mortgage payment that’s an issue. It’s saving up that 250 grand down payment to afford a starter home in a lot of cases. So, can you tell me how that would work?

Mike Moffatt: Absolutely. So we have a couple of recommendations here. One is really simple: the federal government has programs for the first home savings account that help people save tax-free. And there are certain limits on these. There are annual limits and lifetime limits. And those limits aren’t indexed to inflation. And we know inflation is real. So the obvious thing to do is have those amounts go up over time automatically with inflation. It’s in my mind, simple, a no-brainer.

But the other thing that is more ambitious and perhaps more controversial is that the government can lower the amount, the percentage, you need to pay on a down payment. And there are a couple of ways they can do this.

One is, let’s say you’re buying a home in Toronto for just under $1 million, and you need roughly about 100k in savings to do that. One of the things that the government can do is to offer eligible first-time buyers, or even eligible young buyers, it can actually loan you some of that money at a very low interest, or no interest way.

Some provinces do this. There are programs in Prince Edward Island and in New Brunswick. There’s nothing preventing the federal government from doing something like that.

The other thing that they can do for eligible buyers is reduce that minimum percentage, right? Because that is a federal rule. And nothing is stopping the federal government from saying, Hey, if you’re a buyer under 40 or you’re a first-time buyer, that 5% minimum, we’re going to knock it down to 2% or 3%, to help you out.

These aren’t figures brought to us from God via Moses. These are regulatory requirements. And nothing prevents the federal government from changing those requirements.

Sabrina Maddeaux: So there are some interesting solutions. But one of my concerns is that these actually would create more demand. So maybe some young people can buy a home more easily, but they’re essentially still going to be in debt for a very long time. This creates essentially a floor where housing prices aren’t going to fall, and they ultimately do need to fall to restore affordability.

So would this just cause home prices to fall or even increase?

Mike Moffatt: And that’s a really valid concern. And there are a couple of ways that we can deal with that. The first is that you don’t make everybody eligible for this; it’s only either young buyers or first-time homebuyers. So investors or older buyers wouldn’t be able to get this. So it does create a bit of a competitive advantage.

Even with a competitive advantage, it might just be throwing more money on the same number of homes and causing some price escalation, even if it’s giving younger buyers a leg up. One of the ways we can prevent that is by having either these savings programs or these lower requirements only for newly constructed homes. So what that does is it has advantages for newly constructed homes.

So it basically incentivizes new home construction. So that way, you’re not bidding up the price of existing homes. Hopefully, it acts not just as a demand-side measure but also as a way to stimulate new supply. But I totally agree with your concern. I think it’s valid. And I think that the government always, when they’re designing policy, need to ask themselves that question. Are we just stimulating demand here, or are our actions actually going to lead to new supply?

Ideally, they should be going for the supply options.

Sabrina Maddeaux: Now, the report talks about how we need to not just be focusing on first time home buyers, but we also need to think about seniors who want to downsize, as well as what you call second time home buyers, which are young families that live in a small condo but need more space and want to upgrade from that starter space to a family sized home.

What do you have in mind for them?

Mike Moffatt: So this is a huge issue. The difficulties for a lot of younger buyers isn’t always the first time home. It’s actually the second one. They might be able to afford that dog crate condo, as you and our friend Ron Butler say, but then have trouble upgrading to the larger home. There used to be this theory that you buy the dog crate condo, and then it goes up 10% a year, and then you sell it. You might be able to upgrade, but condo prices probably aren’t doing that anymore. So the pathway is probably closed. I see you shaking your head.

Sabrina Maddeaux: It might be going down 10% a year on the dog crate condos, which I think is one of those fears, too. If even those prices start to go down and you can afford to get in, do you then get stuck in one for the next 20 years? And by stuck in it, I mean that you finally afford to get in, but then either you don’t have an increase in equity, or you actually lose equity. So then you’re not actually able to leverage that on the traditional homeownership ladder, where you would [traditionally] be able to roll that into a larger family-sized home.

Mike Moffatt: Absolutely. And I think this is going to be a huge issue going forward. And I think the federal government and other governments are overfocusing on first-time buyers, where I think for younger people - and some of those younger people are getting quite, quite old these days. I’d say maybe anybody under 45.

I actually think in a lot of markets the challenge is going to be the second-time buyer. The young second-time buyers who are not able to build up that equity, but are starting to have their first and second kids. And go, I need more space, but I can’t afford that larger space. And there are no vehicles there for me.

So what can we do about that?

Well, the obvious one is GST. Extend that first-time GST home buyers’ credits to second-time buyers, to seniors, and so on. The GST only applies to new homes, so it basically acts like a construction tax. For buyers who aren’t eligible for this credit -let’s say you’re in Ontario - between a 5% GST and an 8% PST on a new home, you’re adding 13% of the cost of that.

That’s something that governments can get rid of with the stroke of a pen. If that 13% tax were eliminated overnight, you’d be able to not only get first-time buyers to become second-time buyers, but also create the conditions for seniors to be able to downsize into new condos - new, smaller units, and free up housing for the next generation.

The other thing you can do for seniors is that there are some issues where seniors might want to take their family home and add an 80U to it, or maybe take their home, split it into a duplex, have a basement unit to it, which they rent out or sell out. If you do that now, seniors can get really dinged on their OAS and some other programs like that.

So, I think we should be looking at exemptions or at least provisions that say, If you’re a senior and you’re actually creating new housing, that you have some incentives to do so, and we’re not saying, You’ve done this, we’re going to claw back all of these other programs for you. I think we’d have to design that carefully.

I do think it’s something that the federal government should be looking at.

Sabrina Maddeaux: Finally, the peace talks about getting existing single-family homes out of the hands of investors and back into the hands of end users. What do you have in mind there?

Mike Moffatt: So we have a two-part plan, and we’ve talked about this in a few areas. We had an op-ed in the Toronto Star at the beginning of January, with John Shell and Matthew Mendelson of Social Capital Partners. And I think it’s a really elegant plan.

First, the federal government has talked about bringing back this 1970s tax provision called MURB, for multi-unit residential buildings. It’s this nice program that provides incentives and benefits to mom-and-pop investors with some money, they can pool it together, and they can build a brand new apartment building. These are usually townhome complexes or low-rise apartments. This doesn’t make sense for high-rise, but it’s the 20, 30, 40-unit kind of building. So they could park their money in that. Over the last 20 years, a lot of those investors have been buying up existing homes to rent to students, which is helpful, but again, it’s been taking homes off the market. So what we would suggest is that if you are an investor and you own one of these single-family homes that you bought a while ago, if you sell that home in the next three years and take all of that money and put it into a MURB, we will defer your capital gains until you sell that MURB. We’re allowing you to roll over one asset into another asset. And it’s a really elegant solution because it accomplishes two things at the same time.

The first thing it does is it gets single-family homes back into the hands of families. But secondly, it creates all of this construction capital out there to build new apartment buildings. One of these two birds, one stone approach, where smart policy design can accomplish two positive outcomes at the same time.

Sabrina Maddeaux: It is an elegant policy design. And part of me thinks that this needs some rebranding from a comms perspective. Like MURB, you hear that? Not a very sexy title. But the lesson here is that throughout the entire episode, there is a lot the federal government can be doing. And we heard about housing affordability during the last election campaign, and now, from my perspective anyway, the federal Liberals have gone pretty quiet on it. So let’s not let them get away with that.

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

Mike Moffatt: And thank you to our viewers and listeners. If you have any thoughts or questions about 1970s era tax policy or 1970 era video games, please send us an email to Missing Middle podcast at gmail.com.

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