Globe & Mail: Younger Canadians deserve compensation for enduring higher home prices

Originally published in The Globe & Mail on June 8, 2024

Home prices should stall, not fall too much. That’s a point of view that’s recently been espoused by Prime Minister Justin Trudeau. I think he is right – on one condition.

My caveat: We should compensate younger people for sacrificing their standard of living in return for asking them to endure higher housing costs to protect older people who bank on current home prices for their retirement.

So far, this intergenerational reciprocity is missing from Canada’s housing plan. Adding it is essential if Ottawa is to fulfill its promise of “fairness for every generation,” the theme of the latest federal budget.

This policy weakness was featured recently by Globe and Mail reporter Irene Galea in an interview with the Prime Minister on the City Space podcast. As a self-described Gen Z, Irene shared that housing prices would need to drop by 50 per cent before they will become affordable for her generation. Or, if this reduction is unacceptable to homeowners, most in her generation will need to wait 18 years for their incomes to catch up while home prices stall.

Presented with these options, the Prime Minister responded as almost any politician would when homeowners remain the majority of voters. He reassured listeners that his government intends for home prices to “retain” their value, because housing wealth is a “huge part of people’s potential for retirement and future nest egg.”

In the same breath, he acknowledged that intergenerational inequity remains. Today’s higher home prices often create a “massive” difference in wealth between owners and renters. “That’s not necessarily always fair,” he concluded.

There is now political consensus about this problem, which makes me hopeful.

I’ve highlighted before that Conservative Leader Pierre Poilievre has also emphasized how the rapid increase to home values powered “a colossal wealth transfer from the working wage earner to the wealthy asset owner” – many of whom are older homeowners like me. His current ad campaign makes clear why this colossal transfer is a big problem for younger people: “We had a deal in this country when I grew up ... You get a job. You get a house by your 20s. That deal is broken.”

Since both party leaders have named this intergenerational problem, our country is now better positioned to design an adequate plan to tame it.

I fully sympathize with any politician’s unwillingness to contemplate a deep decline in housing prices. Despite our determination to restore affordability, my own organization, Generation Squeeze, doesn’t judge it is politically feasible. A steep fall in prices would anger too many older voters, and risks spreading other damaging financial problems throughout the economy.

But the political decision to protect an older generation’s housing wealth out of concern for their retirement inflicts a nasty sacrifice on younger generations. It rules out home ownership for many, while imposing expensive rents for smaller spaces, often at greater distance from their jobs.

Nor does this sacrifice just protect a nest egg for many retirees. As Mr. Poilievre’s wealth analysis reveals, home ownership has become a slot machine for many people like me.

Housing may have been a nest egg when owners gained equity primarily by paying off their mortgage. Monthly payments functioned like enforced piggy bank savings. Over years, people shifted from debt-holder to asset-owner, leaving them rent-free in retirement with some equity to draw down.

But the last decades changed this cultural norm, especially in British Columbia and Ontario. Gaining equity primarily by paying off the mortgage was supplanted by the expectations that housing values would also grow exponentially.

While preserving these wealth gains, many politicians now hope we can flood the market with new supply that will reduce rent or ownership costs for younger folks. There is little chance this will happen in the next while without major government subsidies.

Scaling up such subsidies is how older, affluent homeowners can begin to compensate younger folks for tolerating a political bargain that protects our wealth windfalls at their expense. We can contribute more to scale up deeply affordable, energy-efficient, family-sized rental and co-op housing, and ensure postsecondary and child care fees no longer cost mortgage-sized payments.

Sadly, as readers of my earlier columns will know, contemporary federal and provincial budgets do the opposite. They disproportionately increase spending for retirees, while leaving deficits for younger people to pay later.

Correcting this age-imbalance in government budgets is the least we can do to compensate younger folks for the political calculation that they must forfeit some of their standard of living to safeguard the housing wealth gained by many older Canadians like me.


Paul KershawDr. Paul Kershaw is Founder, Lead Researcher & Executive Chair of Generation Squeeze. He is a policy professor in the UBC School of Population and Public Health, and Director of the UBC Masters of Public Health program.

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