To build a Canada in which people of all ages can thrive, and to meet respond to the generational challenge set out in Prime Minister Carney’s Mandate Letter, Generation Squeeze recommends that Budget 2026 immediately act on the following 4 recommendations.

Recommendation 1: Make Old Age Security responsible, modern, and fair

At a time of rising living costs and growing economic uncertainty, it’s essential that our collective investments in income supports reach those who truly need them. Old Age Security (OAS) no longer meets this goal. Retired couples with six-figure household incomes receive $14 billion a year in OAS subsidies, while more than 400,000 seniors live in poverty and young and working people face rising financial insecurity. Clearly, OAS has drifted far from its original aim of protecting seniors from financial deprivation – a fact reinforced by the Auditor General’s finding that Ottawa does not know if OAS is meeting its objectives, and by regular media coverage of seniors with millions in assets receiving publicly funded OAS subsidies.

There is a practical solution. By asking just 20% of retired couples with household incomes over $100,000 to take slightly less from OAS, Canada can save enough to eliminate seniors’ poverty and strengthen affordability for young and working people. This win-win plan reflects the intergenerational solidarity many Canadians practice every day within our own families – which is why polling shows a strong majority support these changes from people of all ages. Seniors themselves are standing up to say they are willing to take less from OAS so funds can be used to advance other important national priorities.

An OAS threshold of $100,000 is well above Canada’s median family income of $74,200. It also remains more generous than other income support programs. The Canada Child Benefit begins to be clawed back at $81,000 of household income, even though families with children have higher rates of poverty, less wealth, and are less likely to own homes than older Canadians.

The need to update seniors’ income benefits was recognized decades ago. In the 1990s, the Liberal government proposed reforms to address the pressures of population aging and reduce financial burdens for younger generations. Then Prime Minister Chrétien began this process with sweeping changes to protect the sustainability of the Canada Pension Plan – the success of which is now a key part of his legacy. Similar updates were not made to OAS, and are now even more urgently required, better late than never.

At nearly 1/5 of the federal budget, OAS spending is already sufficient to sustain current levels of financial support for 80% of seniors – while also eliminating seniors’ poverty and improving affordability for working-age households and children. Budget 2026 can deliver generational change by making OAS responsible, modern, and fair.

Recommendation 2: Eliminate outdated tax credits that don’t deliver financial support to those who need it

The non-refundable Age and Pension Income Tax Credits for retirees cost Canadians about $7 billion each year – yet fail to help most low-income seniors. Canada Revenue Agency data confirm that just 39% of Age credit claimants, and 17% of Pension Income credit claimants report incomes below $25,000. Redirecting funds from these inefficient tax credit to the GIS/OAS system would be a far better way to improve income security for economically marginalized retirees.

The Age Credit costs $5.5 billion each year. This is equivalent to Ottawa’s entire 2023 investment in $10-a-day child care – a sum widely celebrated as historic. The credit shelters $8,000 of income from taxation for those over 64, delivering a maximum benefit of $1,200 for retirees with moderate incomes between $25,000 and $40,000. While it gradually declines thereafter, it still delivers benefits to retirees with incomes near $100,000. Considering Statistics Canada findings that many younger people are delaying or forgoing parenthood due to financial pressures caused by the growing gap between housing costs and earnings, the age-based design of this tax shelter appears increasingly arbitrary – especially when seniors have the most wealth and least poverty of any age group.

The Pension Income Credit costs Ottawa $1.4 billion annually. It enables any retiree to shelter $2,000 in pension income from taxation, saving approximately $295 for seniors with incomes above $25,000 – an amount that does not decline in value as income rises. This credit privileges pension income over earnings from paid work, even though low-wage workers face higher risks of poverty and housing insecurity than retirees.

These credits were identified for elimination under the Chrétien government, to preserve funds to respond to predictable fiscal pressures on OAS from population aging. With deficits now ballooning, it is timely to reconsider this wisdom.

Recommendation 3: Eliminate seniors’ poverty and strengthen affordability for young and working-age Canadians

Detailed policy modeling (using Statistics Canada’s Social Policy Database and Model) shows that recommendations 1 and 2 will generate at least $14 billion in annual savings. The result is transformative potential to act on Prime Minister Carney’s mandate letter commitments to bring down costs and help Canadians get ahead – while also ensuring that taxpayer funds are spent efficiently by Ottawa. All without raising taxes or growing the deficit.

Compared to relatively modest recent investments in the new Disability Benefit or the School Food Program, responsible updates to Canada’s retirement policies can:

• Eliminate seniors’ poverty by giving $5,000 more on average to each of the 400,000 seniors who fall below the official poverty line
• Double federal investments in housing and postsecondary education
• Accelerate $10 a day child care expansion by 50%
• Finance the recently announced Canada Groceries and Essentials Benefit
• And more

As Budget 2026 reviews spending and seeks high-impact investments, it is timely to modernize subsidies for financially secure retirees to help Canada meet the pressures of the current moment. The fiscal return is high – and Canadians are ready.

Recommendation 4: Renew the National Housing Strategy – and remedy current gaps

Canada’s National Housing Strategy (NHS) will expire in 2027. Renewing the NHS is essential to deliver an overarching framework for housing investments during a persistent affordability crisis. Budget 2026 must commit to a next generation NHS that does five things:

i) Set a clear goal for home prices

When home prices rise faster than earnings, too many young people and renters of any age can't afford a place to call home. A renewed NHS must answer the most important question for fixing Canada’s housing system: do we want home prices to rise, stall, or fall?

It is a mathematical impossibility that we can achieve greater housing affordability without home values dropping. So long as Canada’s housing strategy does not commit to having home values stall (perhaps even fall), Millennials and Gen Z will be faced with unaffordable rents and mortgages. Young people are obliged to carry this burden to protect the wealth that homeowners who have come before them have already gained from decades of high and rising prices.

ii) Recognize that young people deserve compensation for sacrificing their financial security to protect the housing wealth gained by older homeowners

Over the last half century, homeowners have gained $1.5 trillion in wealth. Rising prices have driven up their equity, building savings on which many are now counting.

Canada’s housing policies are designed to protect these equity gains, insulating wealth windfalls for many existing homeowners. The cost of this choice is unaffordable rents and home prices that harm the finances of Millennials and Gen Z – limiting their housing options, as well as their choices about work, education and starting families.

The compensation young people deserve for this profound act of intergenerational solidarity is long overdue. A renewed NHS should initiate dialogue on how best to deliver it – including by targeting some savings from fixing Old Age Security to reducing housing, child care, education and other costs.

iii) Acknowledge that housing policy must consider housing wealth

Housing unaffordability and housing wealth are flip sides of the same coin. The very same high rents and prices that crowd out young people and renters of any age grow the equity of homeowners, increasing their wealth. The fact that the NHS does not mention wealth is a gap with enormous policy significance.

A renewed NHS must rectify this error, acknowledging that high and rising prices have been good for many Canadian homeowners – and that our policy choices have prioritized protecting these gains over ambitious action to secure greater affordability. This recognition is the starting point for reviewing capital gains exemptions and property tax structures that shelter enormous wealth accumulation in primary residences, reinforcing our cultural addiction to rising home values as a private retirement plan. We cannot reward housing speculation with tax breaks without expecting home values to outpace local earnings.

iv) Focus on more than building homes

Canada does indeed need more family and rental housing but supply alone is not enough to reconnect housing prices with local earnings. Recent incremental improvements in affordability in Ontario and BC have occurred despite slumps in new construction. This trend is reinforced by data showing housing supply has grown faster than Canada’s population since the 1970s – even as affordability deteriorated dramatically over the last half century.

These patterns make clear that building more is necessary but not sufficient. Canada’s new NHS must match efforts to accelerate construction with an equal commitment to address the demand-side forces and policy choices that have driven prices so far out of reach.

v) Implement an accurate measure of housing inflation

The Bank of Canada’s mandate binds its 2% inflation target to a Consumer Price Index that understates housing inflation by focusing too much on continuing ownership expenses, and not enough on what it actually costs to buy a home. When housing costs surge but official inflation metrics don’t register it, interest rates stay lower for longer, unintentionally pouring fuel on real estate markets.

If we want a housing system that doesn’t reinflate with every cycle of cheap credit, the NHS must ensure the Bank’s 2% target reflects the true cost of housing – that means including the full purchase price of homes and land.