Leave the Vancouver condo glut alone

The Canadian government is spending $3.2 billion in taxpayer money to buy 2,200 vacant condos in Greater Vancouver and convert them to rental units. That sounds like a housing policy. It isn't. It's a developer bailout.

Those 2,200 units represent roughly a third of the unsold condo glut in the Vancouver area — a glut that exists because developers overbuilt, overleveraged, and misjudged the market. Now the government is stepping in to absorb their losses.

Rare is the policy that unites capitalists and socialists in opposition. This is one of them.

Capitalists argue that government interference with price discovery never ends well. If overleveraged developers made bad bets, the market should sort it out — lenders foreclose, developers go bankrupt, assets move to more stable hands, and prices fall to levels young buyers can finance. That's how the cycle is supposed to work.

Socialists see it differently but reach the same conclusion: this is another instance of socializing losses while developers keep the upside. The moral hazard argument follows naturally — if bad actors are rescued, the next cycle will be worse.

Canada hasn't experienced a serious real estate correction since the 1980s and 1990s. The country sailed through the Global Financial Crisis largely unscathed, and housing prices resumed their climb to what many now consider the largest housing bubble in the world.

In 2026 the cycle finally appears to be turning. Toronto prices are down 30 percent from their peak; some power-of-sale transactions are closing at 50 percent below 2022 prices.

This correction will be painful. It is also necessary.

The government's intervention won't help renters or first-time buyers — it will prop up developers who should be defaulting, delay the price discovery that would restore affordability, and protect banks from write-downs they should be taking.

Let the market work. For every developer that gets hurt, hundreds of Canadians gain access to housing they can actually afford.

Hilliard MacBeth

 

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Richardson Wealth Limited is a subsidiary of iA Financial Corporation Inc. and is not affiliated with James Richardson & Sons, Limited. Richardson Wealth is a trade-mark of James Richardson & Sons, Limited and Richardson Wealth Limited is a licensed user of the mark. Richardson Wealth Limited, Member Canadian Investor Protection Fund.