The Pop or The Plateau: How Does This Movie End?

So here we are. The most indebted nation in the G7. A younger generation locking eyes with a future where ownership is a statistical impossibility. Social cohesion fraying at the edges. The status quo is dead. The only question now is: How does the movie end?

1. The Three Paths Forward

Economists often pretend there are infinite possibilities. In reality, there are only three mathematical ways to resolve a debt bubble of this magnitude.

Path A: The Crash (The US 2008 Model)

Probability: 20%
The bubble bursts violently. Prices fall 30-50% in 18 months. Foreclosures skyrocket. Banks take massive losses and require bailouts.
The Good: It clears the rot immediately. Affordability is restored for the brave.
The Bad: A deep recession. 8-10% unemployment. Millions of families lose their life savings.

Path B: The Stagnation (The 1990s Model)

Probability: 50%
Nominal prices stay flat for a decade. Inflation grinds away the real value of the debt. You bought for $1M in 2022? In 2032, it's still worth $1M, but $1M buys the equivalent of $700k in today's goods.
The Good: No systemic banking collapse. Boomers keep their paper wealth (nominally).
The Bad: A "Lost Decade" for the economy. Investment capital remains trapped in zombie houses. Productivity dies.

Path C: The Inflationary Melt-Up (The Argentina Model)

Probability: 30%
The government panics. They print money to bail out mortgage holders. They introduce 40-year or 50-year amortizations. Asset prices go up in nominal terms (a house costs $3M), but the currency collapses.
The Good: Debt becomes meaningless.
The Bad: The destruction of the Canadian Dollar and the middle class. Feudalism becomes permanent.

2. The "Fake" Solutions

Politicians love to announce housing policies that sound good but do nothing. These are demand-side stimulants masquerading as help.

• The Foreign Buyer Ban: A xenophobic distraction. Foreigners own less than 2-3% of the stock. We have a domestic speculator problem, not a foreign one.
• First Home Savings Account (FHSA): Giving first-time buyers tax breaks to save for a down payment just increases the amount of money chasing the same number of houses. It raises prices.
• 30-Year Amortizations: This lowers the monthly payment but increases the total interest paid and the sticker price of the home. It is financial meth: a short-term high for long-term ruin.

3. The "Real" Solutions (That Hurt)

If we actually wanted to fix the crisis, we could. The policy tools exist. But they are painful for the 66% of Canadians who already own homes.

1. The Concept of "Land Value Tax"

We should tax land, not labour. If you own a parking lot in downtown Toronto next to a subway station, you pay almost nothing in tax. If you build a 50-story apartment building there, your taxes explode. This is backwards. We should tax the value of the land heavily, forcing owners to develop it or sell it to someone who will. This is the single most effective tool to solve the housing crisis, endorsed by economists from Adam Smith to Milton Friedman.

4. The Moral Hazard of "Too Big to Fail"

The deepest problem in Canadian real estate is not supply or demand. It is risk.In a normal market, if you make a bad investment, you lose money. In Canadian housing, the government has signaled that they will never let prices fall.

We saw this in 2020 (deferrals). We saw it in 2023 (negative amortization). When you remove the risk of loss, you encourage reckless gambling. Investors are willing to pay irrational prices because they believe the government acts as an insurance policy. Until we allow prices to fall—and allow investors to lose money—the bubble will never truly deflate.

5. The Broken Social Contract

The housing crisis is breaking the unspoken deal that holds Canada together: "If you work hard and play by the rules, you will have a good life." Today, hard work is irrelevant compared to the year you were born or who your parents are. A nurse earning $80,000 pays 30% tax. A speculator who bought a house in 2018 and sold in 2021 made $400,000 tax-free. We punish work and reward luck. A society cannot survive on that foundation for long.