Housing Outlook for Millennials & Gen Z's -

The federal budget admits millennials and Gen Z are being left behind. Now it’s time to fix the system

Even though the age pattern in spending is presently out-of-whack, the government is showing progress in delivering concrete policies that will make lives better for young people
 Despite promising fairness for every generation, the 2024 budget is still a spending plan that privileges retirees. 

The federal budget always comes with a title summarizing its focus. Prime Minister Justin Trudeau’s early budgets emphasized a “strong middle class,” while the 2024 budget promises “fairness for every generation.

”Never before has a federal budget grappled with how class dynamics have been distorted by how a person’s age affects their standing in the housing system. Income matters less than in the past. Secure housing and home equity matter more, privileging those of us who bought into the market decades ago.

The 2024 budget grapples with these class distortions as the starting point for a new fiscal framework, observing that: “Millennials and Gen Z are watching the middle-class dream become less and less achievable. They worry that they won’t ever be able to afford the kinds of homes they grew up in.”

This acknowledgment is a game changer, because the first step in solving a problem is admitting you have one.

The next steps will take more than a single budget can deliver, because generational unfairness crept into our economy and government slowly over decades. So we must beg for forgiveness from younger residents for the foreseeable future, and ask for their patience as the current government sets out to fix the problem in earnest.

Despite promising fairness for every generation, the 2024 budget is still a spending plan that privileges retirees.Seven ways the 2024 federal budget affects your finances, from selling your cottage to RESPsOAS spending will increase by $31-billion a year by 2028, and medical care by another $17-billion – half of which is used by the 20 per cent of Canadians over age 64. In contrast to these big-ticket items, new military and housing spending will each increase by $2-billion, and funding for a clean economy will increase by $8-billion. This means that the budget protects retirement security more than housing security, national security and climate security.

New spending for younger people also falls well short of the high bar set for retirees. Top-line items include $8-billion more for the Canada child benefit, $3-billion for $10-a-day child care, $8-billion for Employment Insurance and $6-billion for medical care for Canadians under age 45.

All told, the budget adds approximately $3,500 in new spending per person for our aging loved ones (even before counting additional spending delivered by the Canada Pension Plan to accommodate the growing number of seniors.) This figure is more than four times the approximately $800 invested per person under age 45. While this gap remains large, the 2024 budget is narrowing it. Last year, spending on each person over age 65 was over 5.5 times more than investments in younger Canadians. It will be imperative for Ottawa to continue to narrow the age gap in the coming years.

Even though the age pattern in spending is presently out-of-whack, the government is showing progress in delivering concrete policies that will make lives better for young people. A national school food program will help ensure more than 400,000 children have nutritious meals.
The Child Care Expansion Loan Program will ensure more $10-a-day child care spaces are available. This will improve parents’ ability to save for other expenses, rather than pay a fee that equals another mortgage-sized payment.


The 2024 budget investments to build new apartments, protect existing affordable rentals, build water, sewer and transit infrastructure, level the playing field for renters, and support first-time buyers to manage heavy mortgages will all make a meaningful, incremental difference in restoring housing affordability.

But there remains a key deficiency in the federal housing plan. By never mentioning the word “wealth,” the plan ignores why Canada has tolerated rising home prices rising in the first place. Owners, like me, got wealthier. The seeds of this mindset were planted in 1972 when the government decided to create a home ownership tax shelter. For half a century, tax policy has encouraged many Canadians to treat housing not just as a place to call home, but also as a way to get rich – without having to pay many taxes on the accumulated wealth.

We now have a host of policies that incentivize Canadians to want home prices to rise, but work against plans to build enough affordable supply, and put in jeopardy our country’s ability to end the relentless increase in home prices so that earnings have a chance to catch up.

Over decades, these policy incentives inclined many Canadians to tolerate, if not welcome, a growing gap between average home prices and local earnings. This trend accelerated in the new millennium when average home prices rose 60 per cent during prime minister Stephen Harper’s nine years in office (2006-2015), according to Canadian Real Estate data. Average prices have increased another 54 per cent since Justin Trudeau became Prime Minister.

So, while real progress is being made in the budget to improve affordability for millennials and Generation Z, it will take time to undo the scale of damage caused by poor housing policy decisions made in previous decades.

Paying for Boomers

It turns out that millennials and Gen Z aren’t just paying more for housing. They’re paying more taxes to fund boomer retirement expenses.

In anticipation of this budget, I contacted Statistics Canada for data to update my previous study about the evolution of income taxes paid for programs that support retirees. These figures show that the typical 35-year-old now pays around 40 to 60 per cent more for boomers’ OAS and medical care than boomers paid as young people to support seniors in their day. (The precise amount varies by province and income). This extra tax burden on young people will only get heavier in the years to come as budget 2024 implements the planned spending increases for OASBoomers benefited from the fact that “many hands make light work.” In the 1970s, there were seven working-age Canadians to support every retiree, thanks to the postwar baby boom. This ratio established the initial, relatively light tax levels required to provide a firm financial footing for OAS and medical care. But as boomers retired, the share of working-age residents contributing tax dollars to OAS and medical care shrank. Now there are just three per retiree. With fewer hands, the tax burden on each younger person grows heavier – even as they cope with greater financial insecurity. 

This change in the ratio of retirees relative to workers is the primary driver of Ottawa’s current deficit problem. Since the 2024 budget allocates an additional $38-billion in annual spending on OAS and medical care for retirees, revenue needs to rise to keep pace. We’re starting out behind, because provincial and federal governments did not set aside enough of the boomers’ tax dollars to fully cover the cost of publicly funded income and medical benefits as that generation retires. This failure of past planning is surprising, because in 1996, Ottawa astutely increased premiums for the Canada Pension Plan to protect that program from bankruptcy as a result of pressures from boomer retirements.

By failing to similarly adapt revenue plans to pay for OAS and medical care, past governments saddled current ones with a tough choice: raise taxes now, or endure a fundamental imbalance between revenue and expenditures. Since tax increases remain unpopular with voters, this structural mismatch between spending and revenue drives frightening increases in debt servicing charges. At $29-billion, interest payments on unpaid bills left to younger Canadians and future generations is the only part of the federal budget that rivals spending increases on boomers’ retirement.

This structural problem is not the result of a particular government or partisan ideology, despite Conservative Leader Pierre Poilievre accusing Mr. Trudeau of “wasteful inflationary” spending in his response to the budget. While it’s true that Mr. Trudeau’s government abandoned Mr. Harper’s prudent decision to raise the age of OAS eligibility from 65 to 67, that change would have only taken effect in 2023. So the near doubling of federal OAS spending over the first eight years of Mr. Trudeau’s term would have occurred regardless, and continuing increases were already baked into the fiscal framework – although not quite at the pace announced in the latest budget.

Structural Fixes

Overcoming the structural shortfall starts with the government’s continuing spending review. Treasury Board President Anita Anand is on track to save $15-billion over five years by trimming spending from more than 60 federal departments.Saving $15-billion is nothing to sneeze at, because it represents half of the $30-billion promised by the Trudeau government for the $10-a-day child care program over its first five years.But, ultimately, reallocating $3-billion a year barely begins to pay for the extra $38-billion in revenue earmarked for OAS and medical care for those over 64.

So the spending review needs to be more ambitious. The search for further savings should start with outdated tax shelters for retirees. For example, the Age and Pension Income credits date back to 1987, when financial challenges among seniors still lingered near or above those of younger people. They enable retirees to shelter thousands of dollars from income taxation, and presently drain $6.4-billion from the federal budget. Some, or all, of this money could be redeployed to help cover the growing cost of OAS.

Better targeting OAS spending also merits consideration, because there is a big discrepancy between OAS and the Canada child benefit (CCB). Retirees with individual incomes of more than $80,000 still receive full OAS payments, regardless of their housing wealth. By contrast, the clawback for the CCB begins when household income surpasses $35,000 – an income level which mostly represents renters. CCB benefits are clawed back still further when household income exceeds $75,000.


While the search for savings is imperative, opportunities to reallocate spending are likely too small to fill the revenue hole caused by poor planning for boomers’ retirement. The 2024 budget concedes as much by raising taxes on wealth. For the 0.13 per cent of Canadians who report $250,000 a year in profits from selling assets other than their principal residence, the portion of their profits subject to tax will increase from 50 to 66 per cent. This change is projected to raise $19-billion over five years, moving Canada closer to the 75-per-cent inclusion rate for capital gains set by prime minister Brian Mulroney in 1990.

At $4-billion per year, the new taxes on the most wealthy are still nowhere near enough to eliminate the structural deficit caused by poor planning for the retirement of boomers. There are few realistic options to eliminate structural deficits without putting younger generations in even more jeopardy if we don’t require some additional taxation from affluent folks my age and older (I’ll turn 50 this summer).

By affluent, I don’t just mean the superrich. I also mean those like me who enjoy secure housing and have gained wealth from rising home values. Some of this wealth could be used to help pay for the medical care and long-term care we will likely use, as well other programs that Canadians value.

By custom, we think of property taxation as a municipal practice. But Ottawa and the provinces also have constitutional powers to raise annual taxes from property. B.C. already does, and it uses progressive rates. This should become a model for federal consideration as Ottawa explores how best to adapt the tax system to fix the structural problems that now exist in the budget. Adding national progressive rates to annual property taxation, perhaps targeting older Canadians like me living in the most valuable homes, would help to avoid placing most of the burden on younger Canadians to fix the failures of past governments.

An end to overextraction

The payoff from eliminating this structural mismatch while still investing in well-being for young and old alike will be worth it for anyone concerned about our legacy. The prize is the end of a painful era of overextraction from younger and future generations.

We most commonly think about overextraction in environmental terms. We’ve extracted so much of the atmosphere’s limited capacity to absorb carbon that we leave a climate of extreme weather for those who follow. Overextraction is also a root cause of unaffordable housing. There is only so much wealth that can be extracted from our housing system. Many homeowners like me have extracted an outsized amount of this wealth at the cost of making housing unaffordable for our offspring.

Structural deficits are a third example of intergenerational extraction. Most of the new government spending made possible by economic growth is being extracted to fund retirement and medical care supports for our aging loved ones. We sustain this extraction even though today’s retirees have the lowest rates of poverty and the highest levels of wealth relative to other age groups.

The antidote to overextraction is a commitment to generational fairness. The 2024 budget takes important steps to embed this principle into the machinery of government.

It incrementally reduces the age gap in federal spending by improving child care and housing affordability, incentivizes us to leave less pollution for our kids to clean up, warns that OAS is increasing far faster than any other item in the budget, raises taxes on the wealthy to avoid adding more taxes to the young, and persists with its spending review to reduce the deficit.

There remains much more work to do in future budgets to restore fairness for every generation. But it is fair to say these initial steps set in motion a grand national project to renew our commitment to preserve a healthy childhood, home, retirement and planet so we all leave a legacy of which we can all be proud.

Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness.