The Hidden Tax Behind the Housing Crisis

I used to think my parents’ generation won the lottery. They bought homes for what now sounds like pocket change, built wealth effortlessly, and left the rest of us fighting over crumbs in a market that defies gravity. The narrative is everywhere: housing has become impossibly expensive, an entire generation has been priced out, and something unprecedented is destroying the dream of homeownership.

Then I changed the unit of measurement, and the story collapsed.

When you price Canadian homes not in dollars but in gold, the explosion vanishes. The typical house costs roughly the same five to eight kilograms of gold it did in the late 1980s. American homes show the same pattern. Prices swing, sometimes violently, but they don’t march upward in a straight line. What looks like a housing crisis in nominal terms looks more like a currency crisis when measured against something that can’t be printed at will.

Chart: Canada’s benchmark home price in CAD versus gold, 1979 to 2024 (WOWA)

We’re arguing about the wrong problem.

The debate fixates on zoning, speculation, and supply constraints, issues that exist, certainly, but they miss the structural force underneath. The dollars we use to measure houses have been steadily diluted. The unit itself has been quietly shrinking, and with it, the purchasing power of anyone who earns wages rather than owns assets.

This is debasement. If you depreciate the money, everything looks like it’s going up. The result is a transfer of wealth, dressed up as appreciation.

Asset owners see their balance sheets grow. Wage earners and renters watch their purchasing power erode. The politics of this arrangement are elegant: no tax bill arrives, no vote is required, and the redistribution happens silently through the bookkeeping.

Consider something simpler than housing: bread.

In the 1950s and early 1960s, North American coins contained real silver. A pre-1965 dime held about 0.0715 troy ounces of silver. That dime bought a loaf of bread. Today, the silver content in that same dime is worth about US$3.55, which still buys a loaf of bread. The silver didn’t become more valuable. Bakers didn’t become greedier. The dollar simply buys less. What looks like an explosion in bread prices is really the unit changing beneath the transaction.

Or take the five-cent Coke. From the late nineteenth century until 1959, a bottle of Coca-Cola cost exactly five cents. Not approximately. Not on average. Five cents, flat, for more than seventy years. It was possible because money was stable enough for prices to stay fixed.

Vending machines couldn’t make change. Bottling contracts locked in the nickel. When inflation finally made the price untenable, Coca-Cola reportedly approached the US Treasury requesting a 7.5-cent coin. The request failed. The nickel Coke didn’t survive the decade.

Even the word is a reminder that money was once a weight of metal. The silver thaler began as the Joachimsthaler, a large 16th-century Bohemian coin struck from the rich silver mines of Joachimsthal, whose name shortened to thaler and then evolved through Low German daler into the English word “dollar.” The Spanish eight-real piece, better known in English as the Spanish dollar or piece of eight, was a thaler-sized silver coin widely used in global trade and adopted as a model for later dollars. A typical milled Spanish dollar weighed about 27 grams with fine silver content just under 0.8 troy ounces, linking its value directly to bullion markets. At today’s silver price of about US$50 per troy ounce, the silver in one of those original dollars has a melt value of roughly US$39, even before any numismatic premium.

The deeper point is about expectations. In a world where the monetary unit is credibly anchored, businesses can plan decades ahead, contracts can span generations, and prices can remain boring. Inflation, when it existed, was mild enough to be absorbed by productivity gains. That world ended in the early 1970s with the collapse of Bretton Woods, when the final link between major currencies and gold was severed. What followed wasn’t immediate hyperinflation, but a permanent regime shift. Prices began moving constantly. Contracts shortened. Inflation became a policy variable rather than an embarrassment.

The same monetary logic that kept bread affordable and Coke fixed at a nickel also governed housing for much of the twentieth century.

Before the 1970s, houses didn’t reliably skyrocket in nominal terms. They rose, stagnated, sometimes fell, but over decades they tracked wages and construction costs rather than racing ahead. Mortgage terms were conservative, leverage was limited, and the unit of account was stable enough that long-term contracts made sense.

Once that anchor was removed, housing changed character. It stopped behaving like shelter and started behaving like a leveraged monetary asset. As currencies lost purchasing power, houses absorbed the excess. Prices rose not because buildings improved year after year, but because the denominator was eroding. Measured in gold, houses look cyclical. Measured in dollars, they look explosive. The difference isn’t the house. It’s the money.

To make this concrete, imagine Lou Carruthers, a fictional diner owner from 1955 Hill Valley, California. Lou runs a successful café, owns his home, has modest savings. Liquidate everything he owns and you’d get around fifty thousand 1955 US dollars. At the time, gold was fixed at thirty-five dollars per ounce under Bretton Woods. Lou’s life’s work would buy roughly fourteen hundred ounces of gold (about 44 kilograms). Fast-forward that gold to today, and it’s worth about US$5.6 million. The only thing that changed was the dollar.

This is the problem of long-term inflation. It creates the appearance of wealth where none was newly generated, while simultaneously convincing those without assets that they’ve been left behind by incomprehensible forces. Modern homeowners aren’t necessarily richer than their predecessors in any real sense. They merely own assets priced in a unit designed to lose value. Renters and first-time buyers feel the loss acutely because they experience inflation before they can escape it.

The post-pandemic inflation spike made this redistribution visible. Prices rose fastest in essentials. Wages followed with a lag. Asset prices adjusted first. By the time inflation cooled, the transfer had already occurred. Housing sits at the centre of this process. When priced in fiat terms, it looks like a runaway train. When priced in something scarce and durable, it looks far less dramatic.

None of this means gold is superior or that we should return to some imagined monetary past. The point is that the unit matters. Dollars are not a neutral yardstick. They’re a policy instrument, routinely used to inflate away public debt and, less visibly, the purchasing power of the wage-earning population. The housing crisis is real, but much of what we call a crisis is actually a measurement problem. The house hasn’t changed nearly as much as the ruler we’re using to measure it.

If we keep debating housing policy without acknowledging the monetary regime underneath, we’ll keep missing the point: the dollars are worth less, and most of us are getting poorer.