Canada has a retirement crisis.
I know it may not look like it. Many boomers seem to be doing quite well, what with their million-dollar houses, skiing the in winter, and cruises in the summer.
But there is a retirement crisis — one we’ve caused by paying for their retirement through housing.
The boomers, an unparalleled population wave, were always going to get old at the same time, shifting from wealth producers to wealth consumers en masse. That was easy to see coming, and maybe we could have put some cash away when they were younger. But most folks, alas, weren’t fond of taxes, so we didn’t. And, yet, the great switch happened anyway. In 2000, the largest cohort of the boomer generation began to enter their 40s, and over the next decade, the leading edge of the generation entered retirement age. The cost had to be paid. And right around that time, Canadian society found an answer: real estate.
From 2005 to 2024, the average price of a home in Canada tripled. The houses weren’t getting any better, but suddenly, the people who lived in them — boomers — had hundreds of thousands more dollars to play with, right in time for retirement. By inventing millions of dollars in asset value, we effectively transferred oodles of cash from young to old, financing the greatest retirement wave the country has ever seen. I’m not suggesting anybody planned this. But once it happened, it worked too well to stop. Many seniors were rich, and that seemed to kind of work.
The problem is, that was a wildly inefficient and unfair way to finance a generation’s retirement. For one thing, it was regressive: the richest property owners got the best valuations, and it placed the cost of a nation’s retirement on a completely unrelated asset — namely, the younger generations’ housing costs — chocking the development of our cities, fuelling homelessness, and hamstringing the adulthoods of three generations. Young and old were now at odds: one’s golden years came at the expense of the other’s youth, and vice versa.
Yet despite it all, our governments have refused to connect the dots and are now looking very stupid. Prime Minister Justin Trudeau and his ministers, needing to do something about housing, have promised greater affordability — yet not lower prices. “Housing needs to retain its value,” he said in May. “It’s a huge part of people’s potential for retirement and future nest egg.”
Our own leaders have become invested in what is effectively a Ponzi scheme, locked into the insane logic of ever-increasing prices.
If our debates around housing are going to make any sense at all, we have to recognize that they’re essentially debates about retirement. That’s where the money is going — and if we want to change our broken housing market, we need to find a better way to support the boomers.
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I’m not the only one who’s made this connection. In a submission to the federal government, the Canadian Union of Public Employees laid out an argument for boosting public pensions. It goes like this: traditionally, the Canadian old-age-security regime has been a three-legged stool. Two of the legs are government programs: the Canadian Pension Plan, which people pay into throughout their working lives, and Old Age Security, a taxpayer-funded retirement plan available to all Canadians. The third stool is the retiree’s own assets and savings, and, crucially, their workplace retirement plan.
As CPP and OAS aren’t enough to fund a decent retirement, the expectation is that one’s workplace plan will kick in to cover the rest. Yet that’s increasingly out of step with reality: only 38 per cent of workers in Canada have one, and that figure has been trending down for the past 20 years. One leg of the stool is coming up short.
Enter housing. As asset values have risen, that free money has made up for the loss — something the federal government has explicitly encouraged. Its retirement-planning websites include home-equity accumulation as one of the strategies to fund one’s retirement, and the Federal Home Buyer’s Plan lets first-time home-buyers withdraw $35,000 from their retirement savings tax-free. Tax is also waived when selling one’s primary residence. We’ve come to the point that 45 per cent of working Ontario homeowners are relying on appreciation of their home to fund their retirement.
Housing is now the unofficial third leg of the national retirement scheme — and we’re all paying the price.
We need to break that leg. If the past two decades have taught us anything, it’s that the housing market is too capricious to function as a crutch for our demographic crunch. Transferring so much money from the younger generations (renters and buyers) to the older generation (landlords and sellers) has wreaked havoc on our social fabric, and it’s about to introduce wild amounts of inequality into our economy and society, as a fortunate minority of millennials and Gen Zs inherit their parents’ invented wealth.
This is not the way. Society-level problems require society-level solutions that see costs socialized and paid out to the people who need them most.
The answer is a new kind of social contract. First, governments must do everything in their power to crash the housing market. I mean it: hike capital-gains taxes, build out public housing to increase supply, rein in speculation, increase interest rates — anything to aggressively pop the bubble. Forget a 25 per cent dip in prices being considered a “crash.” Get them down to one-third of their current value. Kill the beast.
That’d kick out the rotten third leg, which will need replacing: while the resulting price crash would be wonderful for the younger generations, the retirees would need a bailout. And that’s the place for Old Age Security. Unlike CPP, OAS is a flat-rate, taxpayer-funded program. It’s the most direct, efficient way for the government to immediately make seniors whole again (at least on average: many who gained millions on their homes overnight would likely never see them again).
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An OAS boost at the degree necessary to even out the housing crisis would take an iron stomach. The Bloc Québécois’s recent proposed nudge, already the talk of Parliament Hill, is a mere 10 per cent for seniors aged 65 to 74. At current levels, those folks can expect at most $8,732 per year — far from a living wage. In its submission to the government, CUPE proposes doubling the rate, to $17,464. StatCan, meanwhile, estimates that each retiree today can expect a $550,200 windfall from selling their home. If doubled, OAS would still only amount to less than a third of that amount.
Yet, it’s still the way to go. Homeowners won’t lose the whole value of their assets, meaning OAS wouldn’t have to compensate for the entire lost windfall. Meanwhile, government could means-test and tweak the new top-ups to help smooth the rough edges, ensuring equity in the new system. That’s the advantage of solving societal problems through policy: you can actually do things you want, instead of casting the tea leaves and praying to the gods of market forces.
This may seem like a radical solution. But the real radical act was allowing us to get here in the first place. If you’re a government watching a bubble get this big in your economy — for a basic need, no less! — it’s your responsibility to put a stop to it. It would have been easier to pop it sooner, but we didn’t, so now we’re here. It’s time for a new deal: one that works for all generations and doesn’t pit them against one another.
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