It’s enough to make your head spin.
At any given moment recently, a reader could glance at their favourite newspaper and see conflicting headlines about condo prices plummeting, houses loitering for weeks on the market, and potential buyers going to absurd lengths to afford a place to live.
Canada’s housing conundrum is in flux. Prices are melting, but housing remains unaffordable in the eyes of many a purchaser. Meanwhile, public pressure and policy urge a dramatic increase in housing supply and new builds. But current housing starts are stagnant at best.
And even though affordability indices show persistent improvement, the gap between house cost and cash flow is still too big.
“The single biggest challenge is that for a great number of Canadians, housing is unaffordable,” says the Canada Mortgage and Housing Corp.’s deputy chief economist, Kevin Hughes, in a recent podcast that analyses the 2026 housing market.
The equations don’t add up, and we need to get to the bottom of it. There are many, many conflicting reasons why. But one of them is an incoherence in tax policy.
Why a $17 billion tax break isn’t solving affordability
Housing-related tax measures cost the federal government about $17 billion a year, and that’s not including subsidies or provincial housing supports. Some of those measures encourage taxpayers to buy homes, some of them encourage more building of supply, and some of them favour renting over buying. Or vice-versa.
Most of them were introduced in the name of affordability.
Exhibit A: First Home Savings Accounts.
How the FHSA became a tax shelter for the wealthy
They were promised in the 2021 federal election campaign as a way to help young people buy their first homes. Implemented in 2023, they are wildly popular among those with extra money on hand.
And no wonder. They’re tax-free on the way in (like RRSPs) and tax-free on the way out (like TFSAs). And if you don’t end up using the funds to buy a home after 15 years, you can transfer the money into your RRSP without affecting your available saving space.
The problem is, they’ve become de facto tax shelters for high-income Canadians of all ages, driving significant fiscal and economic costs — all while fuelling demand for homes at a time when supply is the key to stability.
The federal government has now released a second full year’s worth of data and tables about who opens FHSA accounts, confirming earlier trends set out in research by the Canadian Tax Observatory. In 2024, 2.6 per cent of Canadian tax filers — a total of 834,360 individuals — claimed FHSA deductions. That’s almost double the 2023 number.
Over the course of the two years, they sheltered about $8 billion in savings in the accounts.
Who are they? Predominantly, and increasingly, they are relatively well-off individuals, often in their 30s but there are several thousand over the age of 65.
In 2024, you were twice as likely to be an FHSA-holder if you were making more than $80,000 a year than if you were making the median single person’s income of $45,200.
The richer you are, the more you contribute. And high-income Canadians are making up for lost time, often using up all their allotted $8,000 in space in 2024 and filling up their remaining space left over from 2023.
Of course, this all makes sense if you look at the FHSA as a tax shelter. People with more money tend to have more money to put into their accounts.
But it doesn’t make as much sense for first-time housing policy at a time when affordability, especially among low-income households, is difficult. Fuelling demand among those who can already afford to buy homes risks keeping prices higher than otherwise.
And it comes at a fiscal cost too, although it’s hard to say exactly what that is right now. Once provincial matching is taken into account, it’s probably about $2 billion in foregone federal and provincial revenue for this year alone.
Across the country, the housing market is churning mainly because of market forces. Buyers and sellers alike are more uncertain than usual about where the economy and mortgage rates are heading. And the economy is soft these days.
But government policy is also pushing and pulling the market more than usual. Immigration levels are down, but will that continue? Ottawa is actively revamping is national housing strategy, but will that affect market supply and demand? The federal government is pumping billions into building affordable housing. When will it come on-stream in a way that materially affects the housing stock?
Add the FHSA and other tax incentives that fuel demand into the mix, and it’s not just headlines and housing markets that make your head spin. It’s government policy too.
