There is no such thing as a free lunch. In Canada, government-run insurance programs are often presented as tools to help affordability. In reality, they do the opposite.
How Government Insurance Raises Prices
Private insurance companies spread risk internationally and compete with each other. Government insurance spreads risk only within Canada and operates as a monopoly.
The Canada Mortgage and Housing Corporation, known as CMHC, is a federal Crown corporation that provides mortgage insurance to borrowers who would not qualify in a private market.
This sounds helpful, but it increases demand for housing without increasing supply. More buyers chase the same number of homes, which pushes prices higher.
Why CMHC Distorts the Housing Market
CMHC sells mortgage-backed securities that are ultimately guaranteed by Canadian taxpayers. If the housing market crashes, taxpayers absorb the losses.
Because CMHC cannot go bankrupt, there is no real pressure to price risk correctly. This removes market discipline and forces prices upward to protect the system.
Why Vancouver Is a Warning Sign
Vancouver is one of the most expensive housing markets in the world, despite being much smaller than cities like Toronto or Montreal.
This is not because Vancouver is uniquely productive. It is because layered government policies, including CMHC and provincial insurers like ICBC, raise the cost of living across the board.
Why Private Insurance Works Better
Private insurance companies must manage risk carefully. If claims rise, premiums rise, coverage options change, or companies fail.
That is how markets correct themselves.
Private insurers also pay taxes, attract private capital, and compete for customers. Government insurers collect taxes and pass losses onto the public.
The Real Cost to Canadians
Government-run insurance is not free. It acts as a hidden tax on everyone, even those who do not benefit from it.
If CMHC were privatized, housing prices would better reflect real risk, and taxpayers would no longer be responsible for housing market failures.
Final Thought
When you see rising housing prices in Canada, do not just blame investors or banks. Look closely at government insurance programs that remove risk from borrowers and place it on the public.
Markets work best when prices reflect reality.
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