Ari bought the house next door back in the spring. It’s his first home and he is very excited. So excited that he wants to do it again. When he finds his next home, Ari plans to keep the house next door and rent it out. He has it all worked out. He says the bank will give him a second mortgage, no problem. And he doesn’t plan on stopping there. He wants to leverage the equity he’ll accumulate to buy even more rental properties until he can quit his job and live off something called passive income.

All this sounds a little fantastical to me, but I can’t fault Ari for trying to make life more comfortable for him and his family. For many, full-time employment provides barely enough to get by; becoming a landlord can feel like the only path to financial security.

Ari’s approach, however naïve, is emblematic of a broader economic reality. As invaluable government programs, like social housing, have been systematically dismantled and wages have been suppressed to the point where regular jobs can no longer provide a decent life, Canadians have increasingly turned to rent-seeking behaviour to resolve their financial insecurity. The result is that single-family homes have become a battlefield; the winners get to collect houses and the rent.

While apartments and multi-family homes are increasingly falling into the hands of a small cadre of financialized firms, single family homes are being captured by a mosaic of speculators looking to secure their financial futures. In 2023, 25-30 percent of all home purchases were made by (mostly small) investors or multi-property owners—this is up from 20 percent in 2021. New builds are especially vulnerable, with some regions seeing 90 percent of new builds being handed over to investors.

As small investors seize an increasing share of the nation’s single-family homes, renters are discovering that ‘mom-and-pop’ landlords don’t operate much differently than their larger corporate counterparts. When Ari buys his second home, he will do everything he can to increase the yield of his investment. In many places across the country the most effective way to improve returns is through eviction, and small investors are proving themselves no less ruthless than their financialized counterparts. These evictions are inevitably followed by significant rent increases, the cumulative effect of which is that rents have gone up by 21 percent in just two years.

It’s clear that investor demand is distorting the market and raising housing costs while adding little or no value.

Like Ari trying to get a second mortgage when he’s barely made a payment on his first, small investors are feeding their house-hunger with debt. Canadian households are the most indebted in the G7 and the third-most indebted in the world. Residential mortgage debt has risen to $2.16 trillion. Commentators have described Canada’s debt-fueled housing bubble as “batshit crazy.”

Whether or not the hyperbolic language is accurate, it’s indisputable that homeowners are dangerously overleveraged. Independent landlords need prices to stay high and even continue to rise if they are going to make their monthly payments. They are taking on risks they often don’t fully understand, and many are in the position where a simple correction could turn their investment properties into a house of cards. Last-in investors like Ari are the worst off, without substantial equity built up over years these folks are the most vulnerable to price fluctuations.

Predicting the collapse of the Canadian real estate market has been a hobbyhorse for cranks and intellectuals alike since the 1990s, and I will not join that illustrious cohort today. However, I will note that the housing bubble represents an enormous risk not just for homeowners, but for the economy as a whole.

It’s a risk the government doesn’t seem interested in managing. The federal government has shown no interest in policies that might temper enthusiasm or cool the overheated market. Instead, Trudeau has gone the opposite way and issued a declaration that “housing needs to retain its value.” This abdication of responsibility places the health of the economy in the hands of wild-eyed speculators who have built their portfolios around the assumption that housing prices will always go up.

It might be tempting to look at this situation in a positive light: if the bottom does fall out of the market, maybe Gen Zs and Millennials will finally be able to buy in. But be warned, we’ve seen this movie before. A report from the office of the Federal Housing Advocate observed that “in Canada, the ownership of single-family rental properties is still very fragmented—akin to the US before post-GFC [global financial crisis] consolidation by financial capital.” If the market contracts the consolidation of single-family rentals under large corporations is likely to happen here, too. Indeed, the process has already begun. The small investors might lose, but it will be the banks and the financialized real estate firms that win big.

Regardless of how the market moves the situation is grim. A commodified housing market, whether inflated by investor enthusiasm or subject to the forces of oligopoly, will always put unreasonable financial burdens on us all. We must begin the process of decommodification. Our homes must once again be places where we live; they can no longer be sites of exploitation.

I’m conscious that these arguments won’t do much to change Ari’s thinking. The fact is my neighbour has decided he wants a second mortgage and nothing I can say is going to change that. It doesn’t matter that housing prices are wildly out of proportion to comparable markets around the world, that interest rates are close to the highest they’ve been in two decades, or that he is competing against institutional buyers. Nothing will dissuade him from getting a second home so he can extract rent from his first.

In 1996 American Federal Reserve Chairman Allan Greenspan asked, “How do we know when irrational exuberance has unduly escalated asset values?”

Thirty years later, Ari has given us the answer.

James Hardwick is a writer and community advocate. He has over ten years experience serving adults experiencing poverty and houselessness with various NGOs across the country.