To solve Canada’s housing crisis, we need to change the way we think about wealth

Posted on June 23, 2025 in Equality Debates

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TheStar.com – Opinion
June 22, 2025.   By Sabrina Maddeaux, Contributor

Hard work in Canada has never paid less, in economic opportunity or quality of life. For most young Canadians, it doesn’t really matter how much you make in dollars and cents: without family money, the big picture is largely the same. No homeownership. No path to building wealth. Delayed family formation, or none at all.

This corrosive disconnect between salary and lifestyle goes to the heart of Canada’s generational tensions. Outside rural areas, even a six-figure salary often means living paycheque to paycheque by the time rent, transit, food and other basic expenses are paid for. Needless to say, many young people make far less than six figures, which is why one out of every four food bank users in Ontario these days is employed.

But before you get to rent or groceries, let alone down payments and child care, hard-earned wages disappear straight into government coffers. Although your salary might look good on paper, what you take home is another reality entirely. This tradeoff with the state is one thing when the social contract is honoured and basic needs are met, but heavy taxation combined with diminishing freedoms doesn’t usually end well.

While there are Canadians of every age who complain that they pay too much tax, younger generations are uniquely burdened by Canada’s tax code and its outdated understanding of affluence, which is no longer primarily based on income but on assets. Canadian wealth today is about what you own, not what you make — and whether you own depends largely on when you were born.

As a result, younger workers are paying taxes at rates originally meant for the wealthiest Canadians, all while struggling to achieve the markers of even a historically lower-middle-class lifestyle.

According to Ratehub.ca, you need an income of $205,850 to buy an average home in Toronto. That income is taxed at a staggering 48.28 per cent, combining Ontario and federal tax brackets. For the average Hamilton home, you need an income of $166,500, taxed at a combined 44.97 per cent. Unless you make less than $57,375, your combined marginal tax rate is over 25 per cent — even though your income is low enough to qualify for subsidized housing.

These rates include Ontario’s wealth surtax, which kicks in once you clear $93,132 (a second, higher one hits above $109,727). Yet there’s no city in the province where you can purchase an average home with these salaries. In fact, to so much as rent a two-bedroom apartment in the GTA, you typically need an income between $118,000 and $123,000.

It’s nothing short of absurd to impose wealth-level taxes on workers who can barely afford rent for modest living spaces, much less down payments for family homes. Fixing the generational unfairness in our tax system is essential to restoring the Canadian dream that hard work pays off, but it will take more than cutting rates by a couple of percentage points or offering tax-free investment vehicles such as the First Home Savings Account. We need to think much bigger.

CIBC’s chief executive, Victor Dodig, suggested an ambitious idea along these lines earlier this month. He proposed that the tax-exemption threshold be increased to $75,000 for workers under 30, who wouldn’t be taxed on income below this amount provided they saved at least $15,000 in a tax-free savings account or FHSA. It’s a bold suggestion that lends credibility to the growing chorus of calls for generational tax fairness, which don’t typically emanate from elite financial institutions. Unfortunately, its sole focus on age would likely have unintended consequences and limit the meaningful impact it could otherwise have.

Apart from potentially disincentivizing post-secondary education, there’s the reality that most twenty somethings don’t make anything close to $75,000 per year. Then there’s the high savings burden, which would direct capital away from entrepreneurial endeavours and retirement savings toward propping up overinflated home prices. Dodig argues that young people could save $150,000 to $250,000 for a downpayment within 10 years, but $250,000 down payments should not be the norm in a healthy housing market.

Critically, Dodig’s arbitrary age cutoff would also exclude millennials and older Gen Zs, who’ve been priced out of home ownership and family formation for more than a decade. You can’t simply abandon the better part of two generations and not expect severe economic, social and political consequences.

Rather than focus on age, governments should rethink what qualifies as wealth in Canada and how it could be more fairly taxed — but such conversations have proven politically unpalatable. For a more realistic and immediate solution, they’d be wiser to introduce tax breaks for renters and first-time home buyers, as well as for new parents and common-law partnerships. This would benefit younger Canadians most, targeting not only the areas where they experience the most pain and barriers to opportunity, but also the ones where Canadian society and our economy have the most to gain.

For example, stable marriages and common-law partnerships produce economic, social and health benefits that go beyond just two individuals. Increased fertility rates are essential to our collective future. Making renting a more financially attractive option — one that doesn’t cut off a path to retirement — could relieve some of the pressure on ownership. And young people who are able to attain the traditional markers of adulthood are likelier to be productive and engaged citizens.

The federal government should allow renters to claim some rent on their tax return, similar to how mortgage interest can be written off in the United States. It should also provide a renter-friendly answer to the principal-residence exemption homeowners enjoy, such as a universal lifetime capital-gains exemption or more room for RRSP and TFSA contributions. Meanwhile, new common-law couples would benefit from more generous income-splitting opportunities for a designated length of time as they build their careers and lives together. Income disparities between couples tend to be greater earlier in life, yet most income-splitting benefits are available only to seniors.

For new parents, significantly reduced income taxes per child and the ability to write off larger portions of rent or car payments could be serious game-changers. Ottawa should also consider making maternity and paternity benefits nontaxable and permanently removing the sales tax on many baby-related items.

These reforms wouldn’t solve all of Canada’s housing and affordability problems on their own, but they could begin to rebalance a broken tax system, one that favours the most fortunate and well-established while disproportionately burdening younger workers.

Sabrina Maddeaux is a Toronto-based political columnist, broadcast commentator and National Magazine Award winner.

https://www.thestar.com/opinion/contributors/to-solve-canada-s-housing-crisis-we-need-to-change-the-way-we-think-about/article_73dcddca-359b-4cf2-9d6d-47e303a74dc2.html

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This entry was posted on Monday, June 23rd, 2025 at 2:53 pm and is filed under Equality Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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