From Kraft Dinner to Condos: The Great Shrinkage

Why Canadians are paying more for less, especially when it comes to housing

Mike Moffatt

Sabrina Maddeaux

, and

Meredith Martin

Oct 01, 2025

In this episode of The Missing Middle, Mike Moffatt and Sabrina Maddeaux dig into the rise of shrinkflation, from grocery store products like cereal and Kraft Dinner to Canada’s shrinking condos, and reveal how companies, developers, and government policies are quietly giving Canadians less for more.

From deceptive packaging and behavioural economics tricks to the rise of shoebox condos and poor layouts, we explore how rising costs, investor-driven development, and flawed housing policies are reshaping everyday life. If you’ve ever wondered why your groceries don’t stretch as far or why today’s apartments feel more like closets than homes, this is a conversation you won’t want to miss.

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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 spent way too much time flipping through TikTok, and I imagine what the algorithm decides to show me is a whole lot different than what it decides to show you. I get a whole lot of 1980s stuff like movie clips, music videos, and a whole lot of pro wrestling. Everything a boy from the 1970s could ask for.

But one thing I see over and over, and I mean, I get a lot of these videos, is people complaining about shrinkflation at the grocery store, how cereal boxes are getting smaller, how a lot of things like granola bars that used to come in six packs are now getting sold in packs of four or five, but they’re keeping the boxes the same. Where it used to say six, it now says five, and they’re having to do very creative packaging to fill in the gaps.

Again, if you go to TikTok, you will find a lot of these videos, and if you engage with them like I do, apparently, it won’t stop feeding them to you. TikTok has clearly figured me out because this stuff drives me absolutely up the wall.

I’m a pretty laid-back guy for the most part. I don’t get annoyed by life’s little inconveniences; I get annoyed by big stuff. The little things don’t usually bother me, except this. This irritates me to no end. I’ve actually stopped buying certain products because of it, and certain brands, because I feel like they’re taking advantage of consumers.

Now, you and I are in very different stages in our lives. I’m the dad of two kids who does a whole lot of grocery shopping, and probably because of it, I buy way too much prepackaged food, which is the type of food that’s most likely prone to shrinkflation. It shouldn’t be that surprising that it’s an issue that resonates with me. So I have to ask you, is this something that younger Millennials and Gen Z are noticing, particularly those of you without kids? Is this something on your radar?

Sabrina Maddeaux: For sure. I’m not even on TikTok and I’ve noticed it. It’s something that people talk about and get frustrated with because everyone goes to the grocery store and everyone inevitably notices it.

For me, I’ve always been a big Kraft Dinner fan, and I remember as a kid, you could have a box of Kraft Dinner - my mom would make it up every so often - it could feed me, my brother, and my parents could have some as well. Now, a box of Kraft Dinner: I’m like, is this single serving all of a sudden? Am I just eating more? What’s going on?

I actually went on Reddit to find out if anyone else was as frustrated and experiencing the same thing as me, and it turns out, yes, Kraft Dinner did reduce the serving size in their box, so now it feeds, if you’re lucky, one person, maybe two people, for a snack. Like you, I actually stopped purchasing it because I’d have to buy two or three boxes to actually make it into a meal these days, which is unfortunate.

It’s something everyone’s noticing and is frustrated with for sure. But what I’m curious about is: I know shrinkflation has been a topic of conversation for years, if not decades. Are companies employing this strategy more than in the past? And if so, why don’t they just raise their prices? Reducing a package size seems way more deceptive and sneaky than raising prices.

Mike Moffatt: Yeah, so companies are doing this more in the past, and there’s a lot of really great research on shrinkflation in economic literature. There’s one fantastic study in particular I’m a fan of. It’s still in working paper form, but you can find it online. We’ll link to it in the show notes.

What this economist did was look at products in the UK from 2012 to 2023. All types of products, but really focused on things you would find in a grocery store. So if you look at those grocery store products, what it found is that 80% of the time when a package size changes, they get smaller, not larger.

You do see that when companies make tweaks, they’re more likely to make tweaks to make things smaller. 90% of the time, if you look at all of the product size changes, the cost per unit goes up.

What this means is that even when a company decides to make their product larger, they increase the price by more than an offsetting amount. That’s not shrinkflation, but that can actually hide a price increase, right? Because you say, “Well, yeah, of course, it’s more expensive because the box is now 20% larger,” not realizing that they’ve raised the price by about 35%.

In particular, because this research looked at a time series, it looked at products over time, and they were able to look at “when are companies more likely to employ these strategies?” And not surprisingly, it’s during times of higher inflation where companies will go: “Oh, yeah, we’ve really got to change our price on this because we’re going to squeeze the costs or whatever,” and they’ll try to figure out how to raise that price per unit. Sometimes that’s just a price increase, but a lot of times it’s a shrinkflation strategy.

This particular study didn’t analyze the business strategy portion of it, but there are other studies out there. You can look at business school reports and things like that, of why companies do this. Deception is probably part of it, though a lot of these strategies are so blatant that you would think that would be a short-sighted strategy where people would just get annoyed and not buy the product, feel like a bit of a bait and switch.

That’s important for grocers because these are not one-time purchases, right? These are things that people buy over and over, so if they get overly annoyed, they might go buy something else. There are issues around competition. Though it’s hard these days to buy something else from a different brand when 10 different companies basically dominate the grocery store.

On top of that, there are some behavioural economics reasons why they do this. This is not just companies being jerks. One is that certain prices feel cheaper than they actually are. So $9.99 feels cheaper than $10, even though they’re identical - and now we’ve banned the penny, they literally are identical. If you have a product where you could raise it to $10.99, you might be reluctant to do that because $10.99 seems way more expensive than $9.99, relative to the actual difference. Companies like to keep products at certain price points and will make these changes to hit that price point.

Another issue is what we call anchoring in behavioural economics. A lot of us have a mental model of what stuff should cost and what’s unreasonable to pay, and companies do all kinds of research on this.

If a lot of consumers have a mental model that says, “Hey, spending more than $6 on a box of cereal is unreasonable,” then companies are much better off going, “OK, we’re going to do everything possible to keep that price under $6.” Even if it means making the box smaller or changing the ingredient mix to lower-quality ingredients, and so on.

It can still lead to more sales than just going, “OK, let’s just keep doing what we’re doing and raise it to $7.” If that is seen as a bridge too far for consumers, then companies are very reluctant to raise their prices to that level.

Sabrina Maddeaux: Yeah, that’s all really interesting, and I want to expand this out a bit because shrinkflation doesn’t just apply to the grocery store. It’s also happening with housing. Obviously, we hear a lot about housing prices and how those are out of control, but something that’s talked about less is what buyers or renters are actually getting for those prices.

A big part of the housing crisis isn’t just that costs have completely diverged from incomes, but that living spaces themselves have increasingly diverged from the reality of actually living in them, or at least living comfortably, right? So I’d love for you to lay out the actual data for our listeners. Just how much smaller homes, particularly condos, have gotten in recent years?

Mike Moffatt: On the condo side in particular, we have seen a lot of shrinkflation. So for Ontario, the Municipal Property Assessment Corporation, that’s a corporation that figures out what your home is worth and your property taxes are based on that. They did a fantastic study on this, and we’ll link to it in the show notes.

So in the province of Ontario, and I would imagine we’d get similar results in British Columbia and other places, the median newly constructed condo has shrunk. It was about 965 square feet in the 1970s, and it’s been reduced by about 35% to about 650 square feet today.

This reduction seems to have started 20 to 25 years ago in the early 2000s and has been continuing ever since. So it’s not a one-time drop; it seems that every year, these newly constructed units are somewhat smaller than the year before.

We have to keep in mind, when we say median, that means literally half are larger than 650 square feet, but half are smaller. So we are seeing this big creation of these shoebox condos - as you and Ron Butler and others refer to them - that didn’t really exist in the 1970s, 80s, or 90s.

So this is absolutely a real phenomenon. People are not imagining things when they see that the condos are getting smaller. We have very good evidence on this that they have shrunk by about 35% for the median condo, and most of that reduction has occurred in the last 20 years or so.

I haven’t lived in an apartment, whether it be a condo or purpose-built rental, since 2002, and that was a unit built in the 1950s. I’m not really speaking from experience here. But Sabrina, you’re someone who has been apartment hunting over the last 10 years. You’re our resident millennial. So what’s your reaction to these numbers? Are you seeing this kind of shrinkflation firsthand?

Sabrina Maddeaux: Yeah, I think that’s where everyone is, and I think a lot of young people in Toronto talk about it in their frustrations, because they know that when they’re looking for an apartment or a condo, older buildings tend to have larger square footage.

The last time I was looking for a two-bedroom, so many of the newer builds were technically two-bedrooms, but only 700 or 750 square feet, which is really, really small for that type of space. Now, if you want anything that’s 1000 square feet, which is a bit more appropriate for two people living in it - certainly if you’re working from home - that’s either a luxury build, or you have to get into an older building, because it’s very hard to find something like that that’s been recently built.

This raises the obvious question for me: why are units getting so much smaller? Is this just developers being greedy? Or are there other forces at play?

Mike Moffatt: Well, so on developers being greedy, or profit maximizing, if we want to use the economics term, they’ve always been greedy. My dad is a sheet metal mechanic. He did ductwork, like heating and cooling HVAC work for apartments back in the 1960s and early 1970s, and if you think developers are cutthroat today, the stories my dad could tell you are absolutely wild.

I don’t think the issue is that developers are getting greedier. They’ve always been profit-maximizing.

A lot of it has come down to cost. As land costs, development charges, and so on have gone up, it’s basically shrinkflation. It’s kind of the same thing we see at the grocery store. If people can’t afford to get a mortgage on a home that’s more than $600 or $700,000, then developers are going to have to pay more.

Developers are going to do what they have to do to hit that price point. We mentioned this in a previous episode, when prices were hitting 1300 bucks a square foot before the pandemic in downtown Toronto, that 1000 square foot unit that you and your partner would desire, that’d be looking at 1.3 million.

A lot of that is shrinkflation, and there are these weird disconnects. So in 2017 for instance, the federal government made it more challenging to qualify for a mortgage over $1 million. That was this form of the $6 box of cereal, where developers, whether it be condos, townhomes, or whatever, would really do whatever they could to stay under that price point. So that has a lot to do with it.

I do think that the role that investors play, I think that role can be overstated, but it is real. What gets built on the condo side, condos in Ontario, usually you have to have about 70% of pre-construction sales, or more, before you can start building. Because younger occupants don’t really have the ability to put in a big down payment and wait five, six, or seven years for the condo to be built, these pre-construction sales mostly go to investors who put their money down, then wait that time, and then once the building is built, either rent out the units or sell them to someone else.

There’s a lot of criticism, and I think it can be overblown, but it is a real phenomenon that what gets built on the condo side is often more what investors are interested in and what investors think will go up the most, what they think will be the easiest to flip when a unit is constructed. That’s kind of the two things: it’s a shrinkflation story because of higher costs, but also the way that condo buildings are financed and built.

Sabrina Maddeaux: Yeah, but going beyond just square footage, there’s also an issue of livable space and layouts. I’ve seen units where the quote-unquote bedroom is barely bigger than a closet, or you can’t fit a dining table anywhere, or they’re unusable: like pillars in the middle of a room or weird little nooks that you actually can’t do anything with.

What’s driving all these terrible design choices that take this shrinkflation problem beyond just the square footage number, but also cause shrinkflation in usable space?

Mike Moffatt: Yeah, you’ve seen all of those things, but you’ve also seen, in many cases, a reduction in finishes and that kind of thing. It’s the same thing. If we go back to the cereal example, where shrinkflation is not always just the box getting smaller, but it might be the replacement of certain ingredients. Like, the one that always gets me is ice cream. We’ve seen a lot of ice creams that can no longer call themselves ice cream because they’ve taken out so much dairy that they no longer meet the legal definition.

So you do see things like that where developers are having to make these choices or feeling like they have to make these choices to hit a certain price point.

There are issues as well with things like building code. We’ve talked about the issues around dual egress apartments, and the way that apartments are built these days, because the building code have these hotel layouts, where you have a big hallway and units on either side, and that limits the type of units you can build because that combination of having to have these long and narrow units and the fact that bedrooms need to have a window, really does limit the types of geometries that you can make.

You mentioned the pillars as well. A lot of times, in the 1970s and 1980s, those spots that weren’t that usable might have been used as storage space or things like that. But now developers are trying to squeeze every amount of margin they can out of this.

So space that would have maybe not been considered particularly usable in the 1970s is now getting sold because those costs are so high.

We often hear that young people today have different preferences; they want urban living, but they don’t need as much space. They prefer experience over things. How much of the shrinkflation trend is genuine preference versus young people making the best of bad options? I have my theory on this, but I want to hear yours first, and then I’ll let you know how I see things as somebody a generation higher.

Sabrina Maddeaux: Yeah, I don’t think it’s a preference for the most part. I think young people still want livable spaces where they have a certain quality of life. Certainly, as they’re getting into their later 20s, 30s, they might have a partner, and they may even want children, right? But there’s such a lack of those spaces. They’ve been forced into smaller units, and that’s also all they can afford because prices are so high.

I don’t think there’s a huge number of young people who want tiny micro condos. There might be a few in their early 20s who are willing to say, “OK, I want to be downtown and I’m not in my unit very much anyway, so it doesn’t really matter if it’s any bigger than a hotel room.” But again, that’s a pretty small share of people. We have way more of those micro units now than people who actually want them.

I would like to hear your take on this, so what do you think, Mike?

Mike Moffatt: Yeah, it’s exactly the same.

Economists use the concept called constraint optimization, where it’s that individuals or economic actors basically make the decisions that are best for them, subject to whatever constraints they have. There’s this idea that we shouldn’t infer preferences from the outcomes of constraint optimization problems, right?

The reason why I’m not a starting pitcher for the Toronto Blue Jays is not because I have a preference not to be, but it’s because I don’t reasonably have that option. I couldn’t do it at 28, and I certainly can’t do it at 48.

I think people get this wrong. I see a lot of my generation - Gen X and Boomers - who see what your generation does and say, “Oh, well, they don’t want to own a home,” or “they’re fine with smaller spaces, or they don’t want a backyard.” And I’d say, “Well, no, what are you basing that on?” And they’re like, “Well, they’re not out getting these things.” Well, they’re not getting them because they can’t!

Sabrina Maddeaux: I can confirm young people like backyards.

Mike Moffatt: Well, that’s just it, right?

I’m looking at this from an economist's point of view. You have to control for those other factors, so if we found a bunch of rich millennials who could afford those things, but are choosing not to, then we might go “Okay, yeah, you know what, preferences have changed.” Preferences do change over time. The things that we might’ve been interested in 20 or 25 years ago, people in their 20s today might not be.

It’s not unreasonable to think that preferences change over time, but I do think older generations make this mistake, where they say, “Okay, well, people in their 20s aren’t doing these things. Therefore, they’re not interested in them.”

Sabrina Maddeaux: Now, there’s another interesting trend happening. We’re starting to see record high inventories of small condos in Toronto and some buyer resistance to these micro units, which is leading to the condo crash, which is making headlines.

We just did an episode on this, which we will link to in the show notes, but do you think we’re reaching a breaking point with shrinkflation? Will this condo crash, which is hitting these investor shoebox units the hardest, be enough to solve the issue just through lack of market demand? Or are there other barriers at play?

Mike Moffatt: I do think that these really small units aren’t coming back. I do think that where we are seeing the largest vacancies is where we are seeing investors having trouble unloading units. A lot of it goes to that kind of pre construction side of it, where investors now have these extra units that they can’t get rid of, and even if you had younger people who wanted them, they can’t qualify for a mortgage at today’s rates and those prices. It’s just kind of gummed up the market. Until those units are sold, investors aren’t going to go out and finance new ones, right?

So investors have largely gone from being on the buy side to being on the sell side. So that inventory is actually kind of competing with the ability to build new inventory.

My fear is, and people often see this as a good thing, you had a fantastic article in the Toronto Star a couple weeks ago that we’ll link to in the show notes - I think people go, “Oh, well, this is great. Now that the market for those has gone away, we’ll get a bunch of bigger units.” And it’s like, well, no, it might just get replaced with nothing. We’ve seen that happen before.

We had a big apartment and condo boom in the late 1980s, we had a crash, and then it wasn’t that, “Okay, we’re going to build something else.” Instead, it was just that housing starts and housing sales fell, and it took nearly a decade to recover. So this is one of those things where I say, be careful what you wish for.

We might stop building these units that are challenging, that people don’t necessarily want, but it doesn’t necessarily mean that they’re going to get replaced with something better.

Sabrina Maddeaux: So if we wanted to reverse the shrink inflation trend, what would need to change? Are there any specific policy changes that you think could help?

Mike Moffatt: Yeah, and I do think we need to build more supply. I think this is where people get things wrong a little bit.

When economists and other analysts say, “Okay, we need more supply.” We’re not actually advocating a policy there, we’re just kind of suggesting an outcome. Then we have to sort of figure out, “Okay, well, what are the policies preventing us from getting the type of supply we need? And how do we move forward on that?”

It comes back to that original point around shrink inflation. We need to figure out how to get these costs down and down significantly. So taxes and fees are obvious ones. Development charges are the biggest one we talked about a lot. The fact that you go and you buy a new home, a new condo, let’s say in the city of Toronto, you’re paying 8% provincial sales tax, some of which you get rebated, 5% federal sales tax, which none of which you get rebated because the rebates get phased out well before any kind of reasonable price, 2% provincial land transfer tax, 2% municipal land transfer tax. You’re paying this marginal tax rate of 17% on those units. Then there’s all the embedded development charge on top of that.

We need to get the cost of land significantly down, and that’s by having more sensible land use policies. We need to speed up approvals processes, we need to deal with some of those building code issues to allow us to build the missing middle. We do need to look at how we finance buildings.

I do think that there are problems with the pre-construction investor model, and I do think there are better ways that we can do it, but it all comes down to cost.

If you don’t control the costs, then only one of two things happens. Either what gets built has a price that’s significantly higher than those costs, and you get shrinkflation and whatever else to deal with that, or nothing gets built. The only way that we can have affordable and attainable housing that’s high quality is if those costs are substantially lower.

Sabrina Maddeaux: Yeah, all ties back to affordability at the end of the day. Well, thank you everyone so much for watching and listening, and thanks to our amazing producer Meredith Martin.

Mike Moffatt: If you have any thoughts or questions about 1980s pro wrestling, please send us an email at [email protected] and we’ll see you next time.