How Canada’s Homelessness Boom Happened – Reasons Behind Our Homelessness Horrors

In the summer of 2021, (and increasingly more so in 2024) I noticed a stark reality unfolding before my eyes: the once-secluded riverbanks had transformed into makeshift homes for those unable to afford housing in the city. 

So what’s causing it? Well, at the root of Canada’s homelessness boom are 6 reasons. We’ve researched, asked our Canadian neighbors and expats, and here’s what we’ve found are the drivers of this discouraging trend:

1. Increased rental prices for accommodation
2. Financialization of real estate in Canada
3. Short-term rental (Airbnb, VRBO) contributing to hoarding of houses 
4. Low building starts in Canada 
5. Lack of political will to lower housing prices.
6. Excess Demand: The Challenge of Housing 1M+ Permanent Residents and Students Annually

Now, let’s have a detailed look at these reasons and their effects on Canadians.

Reason 1: Increased Rental Prices for Accommodation

One of the main reasons behind the Canada’s homelessness boom is the skyrocketing cost of renting a place to live. According to the Rentals.ca, the average rent for a two-bedroom apartment in Canada in January of 2024 was $2,196 equalling an increase of 10% annually.

This means that renters have to spend more than 30% of their income on housing, which is considered unaffordable by the federal government. In some cities, such as Toronto and Vancouver, the situation is even worse, with average rents exceeding $2,500 and $2,700, respectively.

The high rental prices are driven by several factors, such as:

• Economic Growth and Inflation: Canada’s economy has seen periods of robust growth, which, while generally positive, can lead to inflation. This economic inflation often translates to higher rental prices as landlords increase rents to match the rising cost of living.
• Low vacancy rates: The demand for rental units exceeds the supply, especially in urban areas where population growth and immigration are high. The national vacancy rate was only 3.2% in 2020, down from 3.4% in 2019. In some markets, such as Halifax and Victoria, the vacancy rate was below 1%.
• Lack of affordable housing: There is a shortage of rental units that are affordable for low-income households, who often have to compete with higher-income renters for the same properties. The Canada Mortgage and Housing Corporation (CMHC) estimates that there are 1.6 million households in core housing need, meaning they spend more than 30% of their income on housing that is inadequate or unsuitable.

These factors have created a vicious cycle where renters are trapped in unaffordable and precarious housing situations and are at risk of becoming homeless if they face any financial or personal shocks. As the Canadian Alliance to End Homelessness (CAEH) warns, “Without urgent action, we will see a wave of evictions and a dramatic rise in homelessness in the months and years to come”.

Reason 2: Financialization of Real Estate in Canada

The term “financialization of real estate” might sound complex, but it’s an important concept to understand when discussing the housing crisis in Canada. In simple terms, it refers to the way housing has become more about making money than providing homes. Housing’s shift from an essential part of life, to a financial asset has significant implications for Canadians and newcomers across the country.

What Does Financialization Mean?

Rise of Corporate Ownership: Large companies and investment funds are buying up properties. They often have more resources to outbid individual buyers, leading to a decrease in homes available for people actually looking for a place to live.

How Does This Affect Canadians?

• Higher Prices: With investors entering the market, the competition for houses increases. This drives up the prices, making it harder for regular people to buy homes.
• Tougher Rental Market: Investors who own properties might prefer to rent them out at high prices. This can lead to an increase in rental costs, making it difficult for many Canadians to find affordable housing.

The financialization of real estate has turned homes into commodities, contributing significantly to the housing affordability crisis. This transformation has made it increasingly challenging for many Canadians to find affordable places to live, feeding into Canada’s homelessness boom and contributing to precarious housing situations like tent encampments. 

Addressing this issue requires a careful balance between encouraging investment and ensuring that the housing market serves its primary function: providing homes.

Reason 3: Short-Term Rental (Airbnb) Contributing to the Hoarding of Houses

A third factor that is increasing Canada’s homelessness boom is the rise of short-term rentals, such as Airbnb, which has taken away housing units from the long-term rental market. Airbnb is a platform that allows people to rent out their spare rooms or entire homes to travellers for short periods, usually for a higher price than the regular rent. ‘ the homelessness situation in Canada is the rise of short-term rentals, such as Airbnb, which has taken away housing units from the long-term rental market. Airbnb is a platform that allows people to rent out their spare rooms or entire homes to travellers for short periods, usually for a higher price than the regular rent. 

Airbnb has become very popular among tourists and hosts alike, as it offers a convenient and flexible way to travel and earn extra income. However, Airbnb also has some negative impacts on the housing market and the communities, such as:

• Reducing the supply of long-term rentals: Some hosts prefer to rent out their properties exclusively or primarily to short-term guests rather than to long-term tenants. 

This reduces the number of available units for residents who need stable and affordable housing. According to a study by McGill University, Airbnb removed 31,000 units from Canada’s long-term rental market in 2018, equivalent to 1.5% of the total rental stock.

• Increasing the demand for housing: Some hosts buy or rent multiple properties for the sole purpose of listing them on Airbnb, creating a portfolio of short-term rentals. 

This increases the competition for housing among buyers and renters and drives up the prices and rents. The same study found that Airbnb hosts earned $1.8 billion from their listings in 2018, which is more than the combined income of the bottom 40% of Canadian renters.

• Disrupting the neighbourhoods: Some Airbnb guests cause noise, nuisance, and safety issues for the neighbours, especially in residential areas that are not designed for tourism. 

Some guests also disrespect the local culture, norms, and laws and contribute to the over-tourism and gentrification of the cities. A survey by the Federation of Canadian Municipalities found that 81% of Canadians are concerned about the impact of short-term rentals on their communities.

These impacts have led some cities and provinces to regulate or restrict Airbnb and other short-term rentals in order to protect the housing rights and interests of the residents and the communities. 

For example, Toronto and Vancouver have imposed rules that limit the number of nights that hosts can rent out their properties and require them to obtain a license and pay taxes. However, these rules are not always enforced or complied with, and some hosts continue to operate illegally or evade the regulations. 

Therefore, more action and cooperation are needed to address the challenges posed by Airbnb and ensure that everyone has access to adequate and affordable housing.

Reason 4: Low Building Starts in Canada

In recent years, Canada has faced a significant challenge in its housing market: a low number of new buildings are starting. Despite the growing demand for housing, the construction of new homes hasn’t kept pace. This has a ripple effect on affordability and availability across the country. Let’s delve into why this is happening and its implications.

In summary, low building starts in Canada contribute significantly to the housing affordability crisis. Without enough new homes to meet demand, prices for renting and buying continue to climb. 

Addressing this issue requires streamlining regulations, finding innovative solutions to land use, and tackling the rising costs of construction to encourage more building projects and, ultimately, create more homes for Canadians.

Reason 5: Lack of Political Will to Lower Housing Prices

One of the critical factors contributing to Canada’s housing affordability crisis is the lack of political action to address rising prices. Despite widespread recognition of the issue, policymakers have been reluctant to implement measures that could lower housing costs. 

This reluctance stems from various factors, including the influence of certain voting demographics and the fear of devaluing real estate. Let’s explore this further.

Why Aren’t Prices Going Down?

• Senior Homeowners Influence: Senior homeowners represent a significant voting bloc in Canada. Politicians may be hesitant to implement policies that could lower housing prices, as this could upset this demographic, which often has a vested interest in maintaining high property values.
• Fear of Devaluation: There’s a fear among policymakers that taking action to lower housing prices could lead to a decrease in the value of real estate. This could have negative consequences for homeowners and the broader economy, leading to resistance against measures that might bring down prices.

The Consequences

• Housing Affordability Crisis: The reluctance to address rising housing costs exacerbates the affordability crisis, making it increasingly difficult for Canadians, especially younger generations, to afford homes.

• Rising Homelessness: As housing prices continue to climb and affordable options dwindle, more people are pushed into homelessness or precarious housing situations, exacerbating social inequality and homelessness rates.

In conclusion, the lack of political will to lower housing prices perpetuates the affordability crisis in Canada. Without decisive action from policymakers to address this issue, more Canadians will continue to struggle to find stable and affordable housing, further deepening social and economic inequalities. It’s imperative that policymakers prioritize solutions that promote housing affordability for all Canadians, regardless of age or socioeconomic status.

Reason 6: Excess Demand

Canada has set an ambitious goal of welcoming over 500,000 permanent residents each year. This initiative aims to boost the economy, fill labour shortages, and enrich the cultural fabric of the country. 

However, this surge in newcomers presents a significant challenge: the current pace of housing construction simply cannot keep up with the demand. Let’s delve into why this mismatch between demand and supply is problematic and what it means for the housing market.

The Demand-Supply Imbalance

• Rapid Population Growth: The influx of over half a million newcomers annually significantly increases the demand for housing, putting pressure on an already strained market.
• Construction Pace Lagging: Canadian builders and developers are struggling to keep pace with the housing needs of this growing population, leading to a shortage of available homes.

Implications of This Imbalance

• Increased Housing Prices: With more people vying for the same number of homes, prices naturally rise. This makes it harder for both new immigrants and existing residents to afford housing.
• Rental Market Strain: The rental market also feels the pinch as newcomers often look to rent upon arrival. This increased demand leads to higher rental rates and lower vacancy rates, making it difficult for many to find affordable accommodations.
  

A Closer Look

Imagine arriving in Canada, filled with hopes and dreams, only to find that securing a place to live is a daunting challenge. For many new residents, this is the reality. They face stiff competition for housing, which can lead to overcrowded living conditions, as seen in some reports where multiple families share single homes or students crowd into basements just to find an affordable place to stay.

Moving Forward

Addressing this issue requires a multifaceted approach:

• Accelerating Housing Construction: Increasing the pace of building to create more homes is crucial.
• Innovative Housing Solutions: Exploring innovative housing solutions, such as modular homes or incentivizing the conversion of commercial properties to residential use, could help alleviate the shortage.
• Supportive Policies for Newcomers: Implementing policies that support housing affordability for newcomers can also make a significant difference in their ability to integrate and contribute to Canadian society.

In conclusion, while Canada’s goal of welcoming a large number of permanent residents each year is commendable for its economic and social benefits, it also necessitates a proportional increase in housing construction to meet the demand. Without addressing this critical issue, the housing crisis could worsen, affecting not just newcomers but all Canadians seeking affordable homes.

How to Avoid Becoming a Victim of Canada’s Homelessness Boom

The explosion of Canada’s homelessness boom and the rise of tent encampments across Canada are not isolated phenomena but the result of a complex interplay of factors. And addressing these issues requires a holistic and concerted effort from all levels of government, the private sector, and communities. 

Innovative solutions, increased political courage, and a recommitment to building affordable housing are imperative to reverse this trend. As we move forward, it’s crucial to remember that every Canadian deserves a place to call home. 

The path to resolving Canada’s housing crisis and the associated increase in homelessness is challenging but not insurmountable with the right policies, actions, and collective will. However, if you’re on the brink of homelessness due to Canada’s rising costs, or simple looking for an economical escape in a new country, we have the right quiz for you. Our Leaving Canada Quiz will match you to the right country based on 22 parameters: