How to Fix Our Housing Crisis? Make Mortgage Interest Tax Deductible

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Oct 20, 2025

Let’s call it like it is — owning a home in Canada has become unattainable for the average person. Whether you’re a first-time buyer, a young family, or even a middle-aged couple trying to upgrade, the story’s the same: prices keep climbing, borrowing costs are high, and policy after policy seems to make it worse.

Meanwhile, south of the border, homeowners are getting a pretty sweet deal that Canadians can only dream of — they get to deduct their mortgage interest from their taxes.

And maybe — just maybe — that’s the kind of idea our policymakers should be considering (rather than their endless rant against foreign buyers and over-hyped/used rental-purpose property incentives).

The U.S. Model: Reward Homeownership, Not Just Talk About It

In the U.S., if you own your home, you can deduct the mortgage interest you pay each year — up to $750,000 in mortgage debt for loans taken after 2017. It’s one of the oldest and most popular tax breaks in the States.

It’s simple: you pay less tax because you’re investing in your own roof, your own stability, your own future. The government recognizes that and gives you a break for doing the right thing.

Critics in the U.S. will tell you it mostly helps higher-income households, and sure, there’s likely some truth to that — but at least the principle is right. The U.S. government rewards homeownership, not just real estate speculation. It believes in people owning where they live, not endlessly renting where they can’t.

The Canadian Way: Pay Full Freight and Say Thanks

Here in Canada, it’s a very different story. There’s no deduction for mortgage interest on your primary home. You pay the full freight every single month — principal, interest, and taxes — and there’s not a penny of relief come tax season (other than some token “green” program that might earn you a few bucks back on a high-efficiency furnace or some other forward-thinking-green-initiative gimmick).

Sure, we have the Principal Residence Exemption (PRE), which means you don’t pay tax when you eventually sell your home. But that’s decades down the road, if ever. It doesn’t help with the actual struggle of owning and keeping that home today.

Now here’s the kicker: if you own a rental property or use your home as an investment, suddenly, mortgage interest becomes deductible. Why? Because the government considers that “business activity.” So, if you’re using housing to make money, you get rewarded. But if you’re just trying to live in it — you’re on your own.

And yes, before anyone rushes to remind me — I’m well aware of the so-called “mortgage interest deductibility” strategies that have been flogged by various financial groups for decades. Yeah, yeah… I get it. If you borrow to invest, that portion of the interest is deductible (for those interested, click here to read a blog I drafted about this concept years ago). But I’m not talking about that. I’m talking about something bigger— something that actually helps the average Canadian. How about making the non-investment portion of your mortgage tax-deductible? The part tied to the roof over your head — the one you and your family actually live under. Now that would be a policy worth bragging about.

It’s like Canada built a tax system that says, “We’ll help you if you’re speculating, not if you’re living.”

A Shame We Even Got Here

It’s honestly a shame that we’ve even gotten to this point. Sure, it makes sense to tighten up with foreign buyer bans — but let’s be real, that’s plugging the leak long after the flood. The damage has already been done.

For years, our major housing markets were magnets for unchecked capital — some of it clean, some of it not so much. The resulting price inflation is baked in, and we’ve all taken a bite of it; we’re now all living with the consequences.

All About Rentals, Not Homeownership

And it gets better (or worse, depending how you look at it). Lately, the federal government has been doubling down on rental-housing incentives — GST rebates, low-cost CMHC financing, and generous tax breaks for big developers building purpose-built rentals.

Don’t get me wrong — we do need rental housing, and plenty of it. But the concerning part is the direction we’re heading. Every new policy seems to cater to institutional landlords and large-scale builders, not families or first-time buyers. It’s as if Ottawa’s new mantra is, “Don’t worry about buying — just rent. Forever.”

And here’s where it borders on ridiculous. How are we supposed to improve our birth rate when the bulk of new housing stock is the size of a motel room — perfect for a sleepover, but there’s no space for little Johnny, let alone for him to spread out and play Lego. We’re luring young people into buying shoeboxes for “independent living,” while quietly discouraging family formation. Then we scratch our heads and wonder why our population growth depends so heavily on immigration.

Why have we accepted this for so long? Why are we okay with policies that make it easier for investors and corporations to expand their portfolios but harder for everyday Canadians to put down roots? Maybe it’s time we shift our protesting might away from the outrage-of-the-day hashtags and toward something that actually secures our futures — homeownership and stability.

An Uneven Playing Field

The results of these skewed incentives are right in front of us. In Vancouver and Toronto, investors can write off their mortgage interest, expenses, and even depreciation, while average working Canadians get none of that.

So when it’s time to make an offer, who do you think wins? The person with tax-deductible leverage, or the person paying full retail on everything?

This is how markets get “financialized.” Homes become spreadsheets and profit centers instead of places to live. Meanwhile, everyone else is told to rent and wait for things to “normalize.” Spoiler alert: they won’t — not without major policy reform.

A Smarter, Fairer Way Forward

Here’s an idea that’s both simple and fair: make mortgage interest on principal residences tax-deductible.

That one move could:

Lower the real cost of owning a home each year.
Give families breathing room amid volatile interest rates and inflation.
Reward long-term ownership and stability.
Level the field between investors and homeowners.

Now, some will say a policy like this would be too expensive for the government — that Canada simply can’t afford to give up that tax revenue. But let’s be honest: the government finds money for everything else under the sun when it wants to. Maybe it’s time to stop squeezing working Canadians and start tapping into the wealth that’s literally under our feet.

We’re sitting on one of the most resource-rich countries in the world, yet we act like we’re broke. If we ever allowed our natural resources sector to properly thrive — responsibly, but confidently — we could generate the kind of revenue that actually funds housing solutions without bleeding the middle class dry. Imagine that: building a revenue stream from big corporations instead of nickel-and-diming Canadians who already need every penny of their paycheque.

We’ve tried everything else — foreign-buyer bans, empty-homes taxes, speculation levies — and yet housing is still out of reach for most Canadians. Maybe it’s time to stop punishing homeownership and start encouraging it.

Because at this rate, it’s not just about affordability anymore — it’s about what kind of country we want to live in. Do we want a nation of homeowners building equity and stability, or one of permanent renters and corporate landlords collecting cheques?

Time for a Policy Wake-Up Call

We talk about fairness, equality, and opportunity — but those ideas start with having a stable home base.

It’s time policymakers stopped treating ownership like a luxury and started treating it like the backbone of the middle class. Because if you strip away all the political talking points, what’s really happening is simple: the people who already own assets are being protected, and the people trying to buy in are being shut out.

That’s not a sustainable country — that’s a slow erosion of the very thing that built Canada’s working class in the first place.

So here’s a thought: if Ottawa really wants to make housing affordable again, forget the next flashy new tax or developer subsidy. Start by giving ordinary Canadians a break.

Make mortgage interest tax-deductible.
It’s not radical — it’s fair. And it might just be the policy shift we’ve been waiting for.