Canada’s Real Estate Bubble Is Even Consuming Its Underground Economy

Canada’s real estate bubble isn’t just consuming the economy, it’s sucking up non-traditional opportunities. Statistics Canada (Stat Can) data shows the underground economy was booming in 2021. The cause of the sudden boom? Housing, which propelled the size of the informal and illicit economies almost as quickly as home prices climbed. 

What Is The Underground Economy? 

The underground economy is market-based economic activity, which can be hidden, illegal, and/or informal. Contraband sales, illegal alcohol, or being “paid under the table” are common examples. While most of this might be relatively harmless, the tax liabilities are dumped onto those who actually do pay taxes. 

Canada’s Underground Economy Is The Size of The Full Economy In Some Countries

Canada’s underground economy isn’t just huge, it’s also growing incredibly fast. Real (inflation-adjusted) growth came in at 4.8%, pushing its size to $68.5 billion in 2021. That’s equivalent to 2.7% of Canada’s GDP, and roughly the size of Panama or Myanmar’s economy. Bluntly put, it’s huge. 

Residential Construction Is Over A Third of Underground Activity

Canada’s underground economy is primarily driven by housing, especially construction. Money going into underground residential investment, or capital spent on building housing or major renovations, surged 32.8% to hit $23.9 billion in 2021.

Canadian Housing Construction Is Capturing The Underground Economy  

The share of Canada’s underground economy attributed to residential investment—primarily building homes and major renovations. 

Source: Statistics Canada; Better Dwelling.

Unusually large growth, though in line with Canada’s economy-wide business investment in residential structures, explained Stat Can. In other words, the country’s real estate boom also produced a boom in underground building. 

Canada’s rising economic dependence on housing has also trickled down to this area. Last year, residential investment made up over a third (35%) of the underground economy. That’s a huge jump from the 24.3% share reported for 2014, the first year Stat Can applied this measurement methodology. 

Canada’s Leasing & Real Estate Offices Are Going Underground

Building isn’t the only area to see a surge in underground activity, according to the estimates. Lessors, and real estate offices are also major contributors to these numbers. Until recently, these two areas were almost insignificant, but with the real estate boom comes more incentive to break the rules.  

Canadian Real Estate Gave The Underground Economy A Big Boost 

The estimated dollar value major real estate segments provided to Canada’s underground economy.  

Source: Statistics Canada; Better Dwelling.

Lessors of real estate, defined as establishments that rent or facilitate rentals, are a big chunk of illicit activity. This segment surged 28.4% higher in 2021, hitting a total of $8.7 billion of underground GDP. The sudden swing helped to push it to 12.7% of all underground output, up from 10.8% back in 2014. Combined with residential investment, just these two areas make up nearly half (47.7%) of Canada’s underground economy.  

One of the more surprising developments is the rise in underground activity at real estate offices. In 2021, underground activity popped 225% higher to $1.2 billion—the first time entering the triple comma club. Its share of the underground economy has more than tripled from 2014 (0.5%) to 2021 (1.7%). A relatively small share compared to the other two segments, but we’re still talking about a billion of unofficial activities. It’s also likely concentrated in the areas we’ve seen a sudden uptick of fraud. 

An Underground Economy Helps Organized Crime And Money Laundering

The problems resulting from underground economic growth far outweigh any possible benefits. Making up the lost tax revenue from other taxpayers is the most obvious problem. However, a less obvious one is that informality allows organized crime to thrive, providing few checks and balances.  

Intelligence reports have highlighted Canadian real estate is a popular tool for organized crime. One agency found criminals often use buildings and renovations to inflate values. The proceeds of the sale are then clean, since the profits are the result of the sale. Any illicit capital used to pay for the renovation, including labor and materials, are just a distant memory. Laundering this way also has the unfortunate consequence of inflating home prices, with just a little capital being enough to influence marginal pressure



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  • Kate 1 year ago

    welcome to the 3d world country club Canada.

  • James 1 year ago

    Lol the ppl caused it they went crazy believing the intrest rates be almost zero permanently. Well the banksters got ya there laughing while stealing the wealth. And top off house prices are a joke been a joke for more than 20 years but hey keep buying cause when they collapse it all they’ll be taking your private ownership. WEF’s slogan lol “you’ll own nothing and be happy”. Well yous will and nothing anybody gonna do about it now. Nothing but complaining is all you’ll ever do cause if freedom convoy didnt teach you what’s in store then go back to sleep

  • J 1 year ago

    Love when they remove comments, wow how true it all is.

  • Sharon Sommerville 1 year ago

    I purchased flooring from a reputable, local retailer. I assumed that they would do the installation but they referred me an independent “contractor” who in turn, supplied a third party to do the installation. Unknown to me, I was now in the grey economy. The invoice was done in pen on the back of a piece of cardboard and cash was preferred. I paid the installer. The “contractor” would get his % from the installer. Given that I worked with a known retailer, I had no idea I was contributing to the grey economy until the day of the installation. It is everywhere.

    • Eli 1 year ago

      I would have demanded an invoice. You knowingly contributed

  • Oldguy 1 year ago

    In my experience cottage country in Ontario has always been a hotbed of the underground economy, particularly in the construction industry. Twenty years ago, lots of local workers made it known that you could get a better deal if you paid in cash, but there was no pressure, just a nod-nod, wink-wink. The past year we built a new cabin, and we had several sub trades make it clear to to me that they would only work for cash.
    So now it is out in the open, fueled perhaps by all the free CERB money. In any event, there is no longer any fear of the CRA.
    Until and unless something major happens, the underground economy will grow wherever it can. And the honest people will pay higher taxes to cover the shortfall.

  • Yoroshiku 1 year ago

    I’m glad somebody is writing about this and linking it to money laundering. A lot of Canadians are now aware that Canada is a haven for money launderers but not a lot know how it works. As a long time renter, I’m always troubled by landlords who pay contractors and repairmen ‘under the table’ by slipping them cash. I’ve only had one landlord who did not do this.

  • Joe 1 year ago

    Who wrote this, the tax collector?

  • Dan 1 year ago

    when intelligence reports back in 2016 raised alarms about money laundering through vancouver casinos were ignored this is the end result.

  • Ahmer Ali 1 year ago

    Best future good job good country beautiful

  • Scott 1 year ago

    Oh Canada… over governed, u set represented…

  • Marlaine 1 year ago

    So DIY are criminals now and should pay taxes for working for themselves.

  • Dave Smiff 1 year ago

    If the current government didn’t tax us to death, people wouldn’t have to work under the table.
    The more they tax us the more people are encouraged to finds around not paying tax.

  • Jaffar 1 year ago

    I think some of these assumptions are wrong, underground economy do help in formal sectors to fund projects. Where people have low credit, social capital and the legal status. So it helps those people and sectors to where people can not access opportunities due to nepotism (so called networking). Government’s do know about this all over the world but ignore it for the well being of underprivileged, under represented and underserved.

    • Amit 1 year ago

      Hi Jaffar, STOP making Canada just like your back home country.

Comments are closed.