The last time US President Donald Trump took office in 2017, there was talk of US citizens moving to Canada. It appears there was a significant uptick from 2017 to 2019, with a considerable stall due to the 2020 pandemic, picking up again in 2021. It did continue into 2022, a year past the presidency, with a similar delay in the data from 2017 to 2018, likely due to application processing times. Digging into those numbers a bit, it appears that US non-citizen residents made the most considerable contribution to that increase by a significant margin. Starting in 2012, the number of temporary residents shifting to permanent residency expanded significantly. My US connections would primarily be in the natural US residents category, which has declined since housing affordability significantly departed from the US around 2008. The presumption that they could sell or rent their housing in the US and move into similarly suitable housing and living conditions was a likely driver of this decline.
Americans thinking about moving to Canada is back in the news. I have had a few connections contemplate the idea, and it seems to be even more serious this time. On the first go-around, Trump was still toxic and divisive, but this time, his doge actions are speaking louder than words as he alienates more than a few American citizens, many of whom I have a tremendous amount of respect for.
His political attacks, false information and outright gaslighting about how the US is being taken advantage of by Canada and other allied nations are unfortunate and disingenuous. This is not meant to be a political rant, and I am not saying that what he is doing in some cases within America is unwarranted. It is clear the left has gone too far left, alienating most of the right and a sizeable chunk of the middle, and that is true on both sides of the border. The other unfortunate matter that I keep seeing as a reoccurring theme is that around the world, almost without question, the leaders who were in power during the pandemic have largely taken the brunt of the fallout as being their fault. While there are reasons for some amount of responsibility, I find it hard to overlook that this was not isolated and laying full blame on any leader without acknowledging the complexities of that period is also not productive in determining the actual causes and planning for strategies to avoid similar future occurrences.
So, leaving all the rhetoric behind, let’s talk about moving to Canada or just those living in Canada. Where and how will we all live over the next few generations? If you search Canada Housing affordability, you will see graphics that look like this: The collapse of the US housing market in 2008 appears to have created a significant divide where Canada continued on its trajectory largely unimpacted by the Sub-Prime Mortgage Crises. The US seems to have picked up its trajectory, and from what I have seen, the decline in Canada generally appeared to level out in most areas outside of the Greater Toronto Area (GTA); This chart may not reflect the most current data, but again with the trade war that data could become very volatile over the coming months as many markets have seen significant pause in activity. The GTA, being the largest market, will have a substantial impact on the overall trend, and the US trade war will also have an outsized weight on that data.
What is the difference in overall affordability, and how did we get here? Keep in mind that these are overall national statistics. Just like market values, location makes a significant difference in affordability measures, and it can vary within markets.
In the following chart, the HPI is converted into a variable of price index to disposable Income. We can see that the “Big Short” Sub Prime correction directly translated into a corresponding affordability difference. Hmm, I am starting to wonder if one of the most significant current differences in our markets was not caused by that crisis, but let’s explore the differences a little more. There are some apparent differences between the US and Canada, so let’s see how those all measure up.
Canada and the U.S. share a long border, and many cultural and economic similarities, but housing affordability is one area where the gap has grown strikingly. While the U.S. has many cities where the average family can still afford a home, Canada’s large metro areas have become some of the most unaffordable in the world. Why?
A big part of the problem is supply. In cities like Toronto and Vancouver, zoning restrictions, slow permitting processes, and local resistance to density make it incredibly difficult to build enough new housing. Even when demand is high, approvals and construction timelines remain sluggish. At the same time, immigration levels in Canada are among the highest in the world on a per capita basis, and most newcomers settle in just a few urban areas. This concentrated demand puts even more pressure on limited housing stock.
Unlike the U.S., where long-term fixed-rate mortgages are common, Canada’s lending system requires most borrowers to renew their mortgages every five years. This may be one of the more influential issues that expose Canadian homeowners to interest rate fluctuations far more frequently. The effects of this could become a significant issue over the next 12 to 24 months, pending the outcome of the trade war and its impact on inflation and interest rate responses.
Geography also plays a role. The two largest cities, Toronto, Ontario being constrained by a protected Green Belt and the Great Lakes, and Vancouver, BC, is boxed in by mountains, the Pacific Ocean, and a U.S. border. These constraints drive up land prices and limit outward expansion. In contrast, many U.S. cities like Houston, Phoenix, or Atlanta can sprawl outward with far fewer restrictions, keeping prices lower. Imagine if the US only had San Francisco and New York. Further, about 80% of the Canadian population is located within 100 miles of the US border. This is partly tied to milder climates and the economic ties with US points of entry.
Then there’s scale. The U.S. population is nearly ten times Canada’s, which allows for greater economies of scale in construction. Larger home builders, more competitive markets, and more robust supply chains help lower the unit cost. Canada, with fewer large players and a smaller skilled trades workforce, faces higher costs and more bottlenecks, especially in high demand regions.
Although not exclusive to Canada, green building initiatives and tighter regulations on safety standards continue to drive up the complexity of construction, which has an exponential effect on the time it takes to get designs approved and built.
Canada’s housing crisis is the result of structural limitations on supply, persistent demand driven by immigration and policy, higher construction costs due to scale and geography, and a financial system that treats homeownership as an investment vehicle while shifting much of the risk to borrowers in the form of exposure to more frequent mortgage renewals. That has not yet resulted in any significant loss, as monetary policies have been allowed to absorb the impacts by extending amortizations and other fiscal policies adopted by lending institutions, which in Canada largely avoid defaults and foreclosures.
These factors and other manipulations of the free market have all contributed to a lack of balance and affordability in the Canadian Housing market.
If it were not for all the other beautiful attributes of living in Canada, affordability would be untenable; however, these forces of attractors and detractors make living in Canada what it is today. After all, nobody is forced to move here, and although we have seen some emigration, the overall population growth speaks for itself. Having said that, who is moving here?
So now, let’s step back.
After notable research of the “internet,” I found, and presented above, what appeared to be several of the most probable reasons for the affordability differences between the US and Canada.
There is one overall striking difference that appears to stand out among all the reasons. The US had a major housing correction in 2007 to 2008. Aside from the smaller market of Canada exhibiting more “noisy data” and some short term reactions, the two markets trended similarly overall before and after that.
So, it really seems that we may be one housing correction away. But will Canada allow a housing correction? Is that the only way to get it done? Even if they would allow it, what would it take? The Canadian housing market has appeared to be very resilient so far, but will the Trump shakedown be the straw?
That’s the meat of my post but if you want to drill down on some more stats where I start to question the leaning of the report and data provided by the Macdonald-Laurier Institute. I jumped in to use their data as the referenced report was recent and had the main chart I was looking for, but in subsequent charts and reporting, they appear to highlight the reduction in housing completions in Canada but then seem to leave the US data out in the very next chart where it would have made sense to compare the two in that respect. Again, the idea is not to be a political rant, but when you are looking at the data, there are many ways data can mislead, some of which are the choices to exclude data or frame it in a way that would obscure or leave out revealing information.
I found one chart from another source that compares the two and while they note Canada has been mar
This chart shows both the US and Canada on one chart. Showing both on starts per thousand may have been easier to read and avoided a dual Y-axis plot, but this is the best I could find. This is a great opportunity to mention the potential issues with the dual Y axis. It is very easy to conflate the visual relationships of the data. This source was particular about pointing out how they had ensured they scaled both Y axis similarly. In other words, the left axis is 3.5x and the right axis is 3.89x. While it’s not perfect, it’s very close and wouldn’t visually skew the presentation of the data. Here is a link to a site that allows you to interact with that issue by freelance senior software engineer Yan Holtz.