Canada is falling behind.

Canada's housing crisis has entered a new phase: construction is collapsing. Housing starts fell to ~245,000 in 2024, and homeowner starts in 2025 are projected at their lowest level in 30 years. Toronto new condo sales are down 90% from the 10-year average. The problem isn't just demand - developers can't make the math work. Construction costs now exceed achievable sale prices in many markets, so projects can't secure financing and never break ground. 35% of homebuilders have begun layoffs.

This is no longer just a zoning or approvals problem - it's a viability crisis. The Bank of Canada cut rates from 4.25% to 2.25% between June 2024 and October 2025, easing mortgage renewals but failing to reignite construction. Meanwhile, 88% of Canadians now cite housing as a major concern, up 8 points since September 2023. The regional picture is stark: Halifax and Quebec saw price increases of 4.6% and 3.9%, while Ontario and BC metros remain in crisis. The national framing obscures that this is primarily a Toronto/Vancouver catastrophe.

The intergenerational divide keeps widening. Homeownership rates for 25-34 year-olds have fallen from ~50% a generation ago to ~35-40% today. An estimated 25-30% of first-time purchases now involve parental financial help. Rental construction is at record highs even as ownership starts collapse - the market is structurally shifting toward a renter nation. Whether you can buy a home increasingly depends on whether your parents own one, not on your income.

An estimated 28,000 Canadians died waiting for surgery or diagnostic scans in 2023-24. Canada has the longest wait times of any universal healthcare system in the developed world. Orthopedic surgery: 40-50 weeks. Neurosurgery: 30-35 weeks. An MRI takes 10-12 weeks - in Germany, it's 1-2 weeks. The system isn't collapsing, but it's brittle - backstopped by individual heroism rather than structural capacity. The idea that long waits are inevitable under universal coverage is false. The Netherlands, Germany, France, and Australia all have universal systems with dramatically shorter waits.

The staffing crisis is the root cause. Canada has 42,045 unfilled nursing positions (up 147% in five years) and a physician deficit of 22,823, projected to reach 78,000 by 2031. Canada produces only ~3,500 medical graduates per year for 41 million people. Australia, with 26 million, produces ~3,800. Meanwhile, ~400 family medicine residency positions went unfilled in 2024 - a historic record. In Quebec, 43% of nurses leave the profession before age 35. You can't train your way out if they keep leaving.

Emergency departments are buckling. Since 2019, Canadian hospitals have experienced 47,500 days of unplanned ER closures - 1 in 5 hospitals were affected in 2024. BC alone saw 250+ closures in 2025, including urban centres like Kelowna and Kamloops. This is no longer a rural problem. Meanwhile, 10,000-15,000 internationally trained physicians in Canada are not practising medicine - many driving taxis or working retail while patients die waiting. The credential recognition system is broken.

Headline inflation is tamed at 2.1% - but the damage is baked in. Prices are 20% higher than five years ago. The rate of increase slowed; the level didn't fall. This is the critical distinction most coverage misses: 'inflation is down' does not mean 'prices are down.' A family of four now spends $16,834 a year on food. Grocery oligopolies - Loblaw, Sobeys, and Metro control 60%+ of the market - have maintained margins while Canadians cut back. The Competition Bureau found that concentration has reduced price competition, but lacks the enforcement tools to act meaningfully.

Food banks have gone from safety net to essential service. 2.2 million Canadians visit food banks every month - double the figure from five years ago. In Ontario, 83% of food bank users are employed. This shatters the narrative that food insecurity equals unemployment. Cost of living isn't a poverty problem - it's a middle-class problem. The food insecurity rate hit 25.5% (10 million people, including 2.1 million children), the highest in roughly 20 years. For a G7 nation, that number is strikingly high.

The Bank of Canada cut rates 275 basis points (from 5.0% to 2.25%) between mid-2023 and early 2026, easing mortgage pressure but not reversing the cost-of-living damage already done. Telecom remains another pain point: Canadians pay 2-3x what Europeans pay for comparable wireless plans, and the Rogers-Shaw merger has not delivered meaningful price relief. In sectors with genuine competition - electronics, clothing, furniture - prices have been stable or falling. In sectors dominated by oligopolies - groceries, telecom, banking, airlines - prices far exceed international benchmarks. Canada's cost-of-living challenge is amplified by housing costs among the worst in the developed world.

Forget headline GDP. The number that matters is GDP per capita - and it's falling. Canada's real GDP per capita declined for 7+ consecutive quarters from mid-2022 through late 2024, the worst stretch in modern history outside of recessions. Total GDP grew 1.5% in 2024, but population grew faster. The country got bigger. Each Canadian got poorer. This is the GDP illusion: growth driven by adding people, not by producing more per person.

The productivity crisis is structural, not cyclical. From 2014-2023, a staggering 84.9% of Canada's GDP growth came from population increase. Labour productivity grew just 0.1% over the entire decade - second-worst in the G7, above only Japan. Business investment per worker trails the US by 30-40%. Canadian firms invest less in equipment, technology, and R&D because protected oligopolies don't need to innovate, regulatory complexity deters capital projects, and the small domestic market pushes the best startups south.

The brain drain is accelerating. A senior software engineer in Toronto earns $150,000-$200,000 CAD. The same role in Seattle or San Francisco pays $250,000-$400,000 USD. After factoring in lower US taxes, the effective gap is even larger. Canada trains these workers at subsidized public universities, then watches them leave. The tariff shock of 2025 - US 25% tariffs on Canadian goods, retaliatory measures, business confidence collapse - shaved an estimated 0.3-0.5 percentage points off GDP growth. Q2 2025 GDP contracted (-0.5%) before recovering. The trade relationship that underwrites Canada's economy is no longer guaranteed.

In 2024, Canada admitted 483,640 permanent residents - meeting its target - while the temporary resident population swelled to 2.5-3 million. Then the government reversed course. The 2025-2027 Levels Plan cut PR targets by ~20% to 395,000 for 2025 and 380,000 for 2026-2028, and for the first time set explicit caps on temporary residents. It was a historic acknowledgment: the system had been overwhelmed.

The real story was temporary residents. International students paying $20,000-$60,000/year at diploma mills, low-wage TFWs filling jobs that should have commanded higher wages, and asylum claimants who were never planned for. Study permit caps (550,162 applications for 2025) and TFW reforms began to slow the flow, but the stock of temporary residents already in Canada remained enormous. Population growth finally slowed in Q3 2025 to its lowest rate since Q3 2020.

Immigration didn't cause the housing crisis - undersupply predates the surge - but the timing overlap made it the visible flashpoint. The question is no longer 'more vs. less' immigration. It's whether Canada can fix the quality and capacity problem - credential recognition, housing starts, healthcare access - before resuming growth. An estimated 50,000-80,000 internationally trained professionals still work in jobs unrelated to their qualifications. The system wastes human capital while failing to match intake to infrastructure.

The federal deficit is about to more than double: from $36 billion (2024-25) to $78 billion (2025-26). This is not a temporary spike - it's driven by the $81.8 billion five-year defence commitment (the largest fiscal event since COVID spending) and Budget 2025's bet on investment-led growth. Revenue is essentially flat (+0.1%) while expenses grow 5.5%. The government is hoping that infrastructure, defence, and industrial spending will generate growth that narrows deficits by decade's end. Critics point out the margins are paper-thin.

Federal-only debt statistics are misleading for Canada. At 41.2% of GDP, federal net debt looks manageable - lowest in the G7. But provinces carry enormous obligations (healthcare, infrastructure), and the combined federal-provincial debt stands at $2.3 trillion, or 74.8% of GDP, nearly double the $1.21 trillion in 2007-08. The 'lowest in G7' talking point cherry-picks the federal number. Interest costs are rising despite rate cuts, because the total stock of debt is larger - debt charges grew 3.8% in early 2025. Fitch has flagged 'persistent fiscal expansion' language, a warning shot on Canada's credit rating.

Multiple expensive obligations are growing simultaneously: the defence surge to 2%+ GDP ($81.8B over five years), OAS/GIS demographics ($75-80B/year and rising), healthcare costs (5-7% annual growth), and debt servicing on a larger debt stock. The spending review is overdue - the federal public service grew 30-40% since 2016 while population grew 12%, and consulting spending doubled to ~$20 billion. The arithmetic doesn't work without spending reform, tax reform, and - most importantly - productivity growth that actually generates the revenue to pay for these commitments.

The story of Canadian defence changed more dramatically in 2025 than in any year since the end of the Cold War. After decades of broken promises and chronic underspending - Canada ranked 27th of 31 NATO members at 1.37% of GDP in 2024 - Budget 2025 committed $81.8 billion over five years to reach the NATO 2% target immediately. The catalyst was blunt: US tariff and sovereignty threats under Trump made defence spending politically mandatory. The Carney government framed it as sovereignty protection, not American compliance.

The spending breakdown reveals the scale of neglect being addressed: $20.4B for people (recruitment, retention, pay raises), $19B for repair and maintenance of existing equipment, $17.9B for new capabilities, $10.9B for digital and cyber, and $6.6B for industrial strategy including a 70% Canadian contracts target. NORAD modernization alone requires $8.1B over 5 years. The 88 F-35 fighters ordered to replace 1980s-era CF-18s won't reach full delivery until 2032. Capital spending is set to grow from $10.6B (2024-25) to $25.7B by 2030-31.

The hardest challenge isn't money - it's absorption. Canada's defence procurement has been notoriously broken (shipbuilding delays, the decade-long fighter jet saga). The CAF is ~6,000-7,500 personnel below authorized strength, and recruitment has struggled even at lower budgets. Starting pay for a private (~$38,000) is below Amazon warehouse wages. Housing near bases is unaffordable. The 2% number also includes ~$14B from non-DND departments (Coast Guard, intelligence, Veterans' Affairs) - some analysts argue this inflates the 'real' defence figure. Still, the shift from decades of 1.0-1.4% to 2%+ represents a genuine inflection point. The question is no longer willingness to spend, but capacity to spend effectively.