Hey everyone, and welcome back to Canada's Housing Crisis Podcast. I'm Alia, and wow... do I have a loaded episode for you today. I mean, seriously loaded. We're going deep - and I mean *deep* - into what might be the most important housing story that nobody's talking about.

You know, everyone's always pointing fingers at foreign buyers when it comes to our housing crisis. And look, I get it. It's easy to blame the outsiders, right? But what if I told you that the real problem - the *hidden* problem - is actually much closer to home? What if the biggest drivers of housing speculation in Canada aren't foreign investors at all, but domestic ones? And not just any domestic investors... I'm talking about your neighbors, pension funds managing your retirement money, and even some government programs that are supposed to be *helping* first-time buyers.

Yeah, you heard that right. The very programs designed to help you buy your first home might actually be making the problem worse.

So buckle up, because today we're going to expose this hidden web of domestic speculation that's quietly strangling Canada's housing market. And then - because I'm not just here to depress you - we're going to talk about real, actionable solutions that could actually fix this mess.

But first, let me paint you a picture of just how big this problem really is.

Right now, as I'm recording this in September 2025, domestic investors account for thirty percent of all home purchases in Canada. Thirty percent! That's up from just twenty-two percent in 2020. Think about that for a second... nearly one in three homes being sold isn't going to someone who's going to live in it. It's going to someone who sees it as an investment opportunity.

And here's the kicker: over twenty percent of Canadians were classified as residential real estate investors in 2023. One in five Canadians owns at least one property beyond their primary residence. Now, some of these are people who inherited a family cottage or something like that, but a huge chunk are actively speculating in the housing market.

The Bank of Canada - and these are their definitions, not mine - classifies investors as buyers who maintain mortgages on multiple properties. And their market share has been steadily displacing first-time buyers. Get this: first-time buyers' share of the market dropped from forty-eight percent to forty-three percent between 2020 and 2023. That's five percentage points of market share that went from people trying to buy their first home to... investors.

Real estate analyst John Pasalis - and I love this guy because he doesn't mince words - he puts it perfectly: "What's been happening over the last ten years is that the share of homes bought by first-time buyers has been declining, and their market share has largely been taken over by investors."

So while everyone's been focused on the foreign buyer boogeyman, domestic investors have been quietly eating up more and more of the housing stock that should be going to people who actually need a place to live.

Now, let's talk about where this gets really interesting... and really problematic. Because it's not just individual investors we're dealing with here. We've got massive institutional players - pension funds - that are wielding enormous influence in real estate markets.

And when I say enormous, I mean *enormous*. Despite managing only six percent of global pension assets, Canadian funds account for sixty percent of private real estate deals directly involving pensions. Sixty percent! We are completely punching above our weight when it comes to pension funds buying up real estate.

Let me break down some of the big players for you. Canada Pension Plan Investment Board - CPPIB - manages six hundred and thirty-two billion dollars in assets. Six hundred and thirty-two billion! And real estate represents eight percent of their portfolio. Now, they've actually scaled back from twelve percent five years ago, but we're still talking about massive amounts of money flowing into real estate markets.

CPPIB has been actively investing in residential real estate, including student housing and retirement communities. And while those aren't directly competing with single-family homes, they're still absorbing investment capital that could be going elsewhere and they're still affecting rental markets.

Then there's Ontario Teachers' Pension Plan - OTPP - which manages two hundred and forty-eight billion dollars. They own Cadillac Fairview, which controls many of Canada's top-performing shopping malls and has expanded Toronto's financial district. They maintain approximately thirty billion dollars in global real estate investments.

Now, here's where it gets really frustrating. These pension funds have been taking some pretty significant losses recently. CPPIB reported a five percent loss on real estate in their last fiscal year. The Public Sector Pension Investment Board suffered a sixteen percent decline. Sixteen percent!

But even with these losses, their continued presence in residential markets - and they do this through subsidiary companies and joint ventures, so it's not always obvious - creates institutional competition against individual homebuyers. When you're a regular person trying to buy a house and you're competing against a pension fund with hundreds of billions of dollars... well, good luck with that bidding war.

And this brings me to something that really gets my blood boiling: government programs that are supposed to help first-time buyers but actually end up making the problem worse.

The First-Time Home Buyer Incentive was discontinued in March 2024. You know why? Because it had terrible uptake and the requirements were so restrictive that it actually limited its effectiveness rather than helping people. Many prospective buyers found the income limits and borrowing restrictions too constraining, and the equity-sharing arrangement was unpopular.

But even the programs that are still running create market inefficiencies. The First Home Savings Account allows forty thousand dollars in tax-free savings per person. The Home Buyers' Plan permits sixty thousand dollars in RRSP withdrawals. These programs inject additional purchasing power into an already overheated market.

Now, you might think, "But Alia, isn't that good? Isn't that helping people buy homes?" Well, here's the problem: when you give more people more money to spend on the same limited supply of houses, what happens? Prices go up! You're not making housing more affordable - you're making it more expensive by increasing demand without increasing supply.

Provincial land transfer tax rebates range from four thousand dollars in Ontario to fifteen thousand in Quebec. The proposed GST exemption on new homes could provide up to fifty thousand dollars in savings. All of this sounds great on paper, but what it really does is create artificial demand spikes by reducing transaction costs for eligible buyers.

It's like this: imagine there's a limited number of concert tickets, and the government says, "Hey, we'll give everyone an extra hundred dollars to buy tickets." Do ticket prices stay the same? Of course not! They go up by roughly that hundred dollars, because now everyone has more money to spend and there are still the same number of tickets.

That's exactly what's happening with housing.

And government acquisitions of older properties at inflated prices contribute to market distortion too. Government agencies have been purchasing single-room occupancy units and buildings requiring extensive repairs at above-market rates. These transactions inflate property values and signal to private investors that governments will pay premium prices for distressed assets.

Canada Mortgage and Housing Corporation's mortgage securitization programs have expanded mortgage access, which sounds good, but they're actually "fuelling demand and real estate speculation, turning housing into a commodity" rather than addressing underlying affordability issues.

So we've got individual investors competing with first-time buyers, pension funds with hundreds of billions of dollars buying up residential real estate, and government programs that inadvertently make the problem worse by pumping more money into an already overheated market.

But here's the thing - and this is why I love doing this podcast - we're not just here to identify problems. We're here to talk about solutions. Real, actionable solutions that could actually work.

Now, let me be clear: solving this crisis isn't going to be easy. It's going to require comprehensive policy interventions targeting individual investors, institutional funds, and those counterproductive government programs I just talked about.

But it can be done. And I'm going to tell you exactly how.

First up: targeted investor taxation. Real estate analyst John Pasalis recommends three immediate federal measures, and I think he's absolutely right. Require thirty-five percent minimum down payments on investment properties. Tax capital gains as regular income instead of giving investors a fifty percent tax break. And eliminate mortgage interest deductibility for investors.

Think about this: right now, if you're an investor buying a rental property, you can deduct the mortgage interest from your taxes. But if you're a regular person buying a home to live in, you can't deduct your mortgage interest. How does that make any sense?

The Broadbent Institute has some great recommendations too. They want multiple taxation strategies specifically targeting domestic individual and corporate investors purchasing properties they won't occupy as residences. This includes separate land transfer taxes and property tax rates for investor-owned residential units, with the revenue going to fund first-time homebuyer incentives and non-profit housing.

And here's a number that'll blow your mind: capital gains taxation allows fifty-point-four billion dollars in real estate profits to flow largely tax-free to investors. Fifty-point-four billion! And the finance sector collected sixty-six percent of corporate capital gains in 2022.

The preferential treatment of Real Estate Investment Trusts makes this even worse. One hundred million dollars collected by the seven largest residential REITs was distributed to investors tax-free in 2022. Tax-free!

But here's where it gets complicated. Research from the University of Waterloo shows that speculation taxes have significant limitations. Large-scale investors typically aren't dissuaded by these measures, because taxes represent only marginal profit changes for institutional players. They either pay the tax or relocate to adjacent markets.

So taxation alone isn't going to solve institutional speculation. We need to go bigger.

Which brings me to pension fund investment restrictions. We need to reform pension fund real estate investment rules to reduce institutional competition for housing.

The federal thirty percent ownership rule currently restricts pension funds from holding more than thirty percent of voting shares in companies. But several provinces have moved to eliminate this limitation. We need to reinstate and strengthen these restrictions specifically for residential real estate.

The Pension Benefits Standards Act requires administrators to follow prudent person standards, but this focuses on portfolio diversification rather than public policy outcomes. We need new regulations requiring pension funds to demonstrate that residential real estate investments don't conflict with housing affordability objectives, or limit their exposure to domestic residential markets.

Germany offers some interesting lessons here. Berlin's rent control measures and restrictions on financial actors have helped combat housing financialization, though implementation remains challenging. Canadian pension funds could be required to prioritize non-residential real estate investments or face additional taxes on residential holdings.

Now, let's talk about government program reform. Because this is where we can make some immediate progress.

We need to eliminate counterproductive tax incentives that fuel speculation. The GST exemption for rental housing, while intended to increase supply, may instead subsidize investor profits without meaningfully improving affordability. Accelerated capital cost allowances for apartment construction primarily benefit large developers rather than addressing speculation.

First-time buyer programs require fundamental restructuring. Current programs inject additional purchasing power without addressing supply constraints, potentially inflating prices further. The discontinued First-Time Home Buyer Incentive demonstrated how poorly designed programs can fail entirely while wasting public resources.

But here's where we can get creative: revenue recycling from speculation taxes could fund more effective interventions. Vancouver's Empty Homes Tax generated one hundred and sixty-nine-point-eight million dollars between 2017 and 2023 while reducing vacant properties by fifty-eight percent. That's a success story!

However, recent exemptions for "vacant new inventory" have weakened its effectiveness by allowing newly built condos to remain empty indefinitely without penalty. We need to close those loopholes.

Supply-side interventions are crucial too. We need to combat financialization by protecting existing affordable housing from acquisition by speculators and financial actors. This involves creating legal frameworks that prioritize housing as shelter over investment returns, potentially including right-of-first-refusal policies for non-profit housing providers when rental buildings are sold.

Zoning reform and streamlined permitting processes remain essential, but they're not enough on their own. We need comprehensive supply-side measures including relaxed zoning bylaws and developer incentives for affordable housing, but these must be coupled with demand-side controls.

International policy models can guide us here. Berlin's experience with rent control and anti-financialization measures provides instructive examples, despite mixed results. The city's "Mietendeckel" froze rents and limited increases to wage evolution plus one-point-three percent annually. While ultimately overturned by Germany's constitutional court, it demonstrated political will to prioritize housing as shelter over investment returns.

British Columbia's Speculation and Vacancy Tax offers a successful model for targeting both foreign and domestic speculation. It applies to properties held by satellite families and domestic investors alike, and it's generated significant revenue while reducing speculative activity.

But let me get specific about what comprehensive reform would actually look like, because I think it's important to talk about real numbers and real timelines.

John Pasalis's recommendations are a great starting point. Thirty-five percent minimum down payments on investment properties would immediately reduce speculative demand by making it much more expensive for investors to leverage up. Taxing capital gains as regular income would eliminate the massive tax advantage that investors currently enjoy. And eliminating mortgage interest deductibility for investors would level the playing field between investors and homebuyers.

The Broadbent Institute's taxation strategies could generate billions in revenue. Separate land transfer taxes for investor purchases could add two to three percent to transaction costs, which would discourage speculative flipping. Higher property tax rates for investor-owned units could generate ongoing revenue while encouraging more efficient use of housing stock.

We need pension fund regulations that limit residential real estate exposure to maybe five percent of total assets, down from current levels. This would still allow pension funds to have some real estate exposure for diversification, but it wouldn't let them dominate residential markets.

Government program reform should focus on supply-side incentives rather than demand-side subsidies. Instead of giving people more money to compete for the same limited housing stock, we should be using that money to build more housing.

Revenue recycling is key. Take all the money generated from speculation taxes, investor taxes, and reformed government programs, and use it to fund non-profit housing development, co-op housing, and direct housing subsidies for low-income families.

International models like Berlin's anti-financialization measures and BC's speculation tax show us what's possible. We need federal legislation that gives municipalities the tools to restrict investor ownership, implement vacancy taxes, and prioritize housing as shelter over investment.

But here's the thing: none of this happens without political will. And political will comes from public pressure. Which is why I'm so passionate about this podcast, and why I need your help to spread the word about these issues.

The evidence is overwhelming. We have a complex web of domestic speculation involving individual investors, massive pension funds, and counterproductive government interventions. While foreign buyers remain a visible target, domestic speculation is clearly the more significant driver of Canada's housing affordability crisis.

But - and this is important - we know how to fix this. We have examples from other jurisdictions, recommendations from housing experts, and policy tools that are proven to work. We just need the political will to implement them.

Targeted investor taxation can reduce speculative demand. Pension fund investment restrictions can limit institutional competition for housing. Government program reform can stop inadvertently making the problem worse. Revenue recycling can fund better alternatives. And international policy models show us what success looks like.

The scale of domestic speculation is staggering. Thirty percent of all home purchases going to investors. Twenty percent of Canadians owning multiple properties. Pension funds controlling sixty percent of global private real estate deals despite managing only six percent of global pension assets. Fifty-point-four billion dollars in real estate profits flowing largely tax-free to investors.

But the solutions are equally comprehensive. We can implement speculation taxes that generate billions in revenue while discouraging speculative activity. We can restrict pension fund residential real estate investments to reasonable levels. We can reform government programs to focus on supply rather than inflating demand. We can protect existing affordable housing from financialization.

This isn't just about policy wonkery. This is about whether Canada is going to be a country where housing is treated as a basic necessity or as a speculative investment vehicle. This is about whether young Canadians will be able to afford homes or whether they'll be priced out by domestic speculators and institutional investors.

The hidden role of domestic speculation in Canada's housing market is massive, systemic, and largely ignored by mainstream political discourse. But it doesn't have to stay hidden, and it doesn't have to continue.

We have the tools to fix this. We just need to use them.

That's all for today's episode of Canada's Housing Crisis Podcast. I'm Alia, and if this episode got you fired up about domestic speculation and housing policy - which I really hope it did - I want to hear from you.

Email us at hello@micme.com - that's spelled M-I-C-M-E - if you want to get involved and ask questions. We'll answer them live on the podcast, and trust me, I love getting into the weeds on housing policy with listeners who are as passionate about this stuff as I am.

And make sure to subscribe wherever you listen to podcasts so you never miss out on learning about Canada's housing crisis. Because the more people understand these issues, the more pressure we can put on politicians to actually do something about them.

Next week, we're going to dive into something equally infuriating: how zoning laws in Canadian cities are literally making the housing crisis worse, and why some of the most progressive cities in the country are the worst offenders. You're not going to want to miss that one.

Until then, keep questioning the narrative that foreign buyers are the main problem, keep pushing for real solutions to domestic speculation, and remember: the housing crisis isn't some mysterious force of nature. It's the result of specific policy choices, and it can be fixed with different policy choices.

We just need to demand better from our elected officials.

Talk to you next week.

[1](https://www.cmhc-schl.gc.ca/observer/2025/summer-update-2025-housing-market-outlook)
[2](https://www.rbc.com/en/thought-leadership/economics/canadianhousing/special-housing-reports/canadas-housing-market-forecast-update/)
[3](https://wowa.ca/reports/canada-housing-market)
[4](https://www.cmhc-schl.gc.ca/en/observer/2025/is-toronto-condo-market-downturn-repeat-of-1990s)
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[6](https://stories.td.com/ca/en/article/canada-housing-forecast-2025)
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[8](https://www.truenorthmortgage.ca/blog/housing-market-forecast)
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