If people opt for having roommates, it's important to write a proper agreement signed by each party’s lawyers, and not just hope for the best.SvetaZi/iStockPhoto / Getty Images
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor, visit our homepage.
Julia Chung’s pro-bono client has a sweet deal as a longtime renter. The client, in his mid-60s, works as a caregiver for a small apartment building and in exchange for his handyman services, he paid below-market rent for a one-bedroom unit.
It’s an arrangement he’s had for more than two decades. But a new owner bought the building and the client recently received notice severing his current rental and caretaker agreement. That puts him in a conundrum as the average one-bedroom rental in Vancouver has skyrocketed to almost $3,000 a month, according to recent data from Realtor.ca. In comparison, the caretaker pays $1,800 a month with little wiggle room to afford a rent increase of that magnitude.
Some advisors may soon find themselves helping clients who face rental challenges and need a complete cash flow analysis.
“People have to start making different decisions and look for creative solutions,” says Ms. Chung, chief executive officer, partner and senior financial planner at Spring Planning Inc. in Vancouver.
She’s helped her client draft a letter to inquire about whether anything can be done such as a reduction in rent charged.
In the past, sourcing other housing arrangements, such as co-ops, senior residences or an even cheaper apartment in a different neighbourhood, nearby city or town, were viable options. Now, with a housing shortage and record rent prices not just in the urban centres, advisors must think of alternatives to keep their clients afloat. Ms. Chung offers a few possibilities that may work if clients agree.
“If” is the keyword as proposed strategies that meet the client’s budget often mean a huge adjustment on their part. For example, Ms. Chung’s caretaker client may need to downsize to a room for rent or a tiny bachelor apartment if he’s set on still residing in Vancouver. And that’s assuming he can actually find a vacant unit.
Sharing accommodation with family and friends
In a case in which the affected renter has relatives, Ms. Chung may suggest they explore multigenerational housing in which all adults can help each other.
For example, a grandparent can help to look after grandchildren if they reside under the same roof as the parents. Ms. Chung also recommends what she calls “The Golden Girls Dream,” based on the 1980s TV show in which four older women shared a house.
“This is an option a lot of us should be thinking about not only for managing housing costs but the importance of maintaining a sense of community,” she says. “Women will arrive at that option quickly because they tend to have better networks of friends.”
She proposed this idea to her client, but he wasn’t thrilled with it.
“Men don’t tend to have those networks traditionally and may have a harder time creating that solution,” she says.
If people opt for the roommate route, Ms. Chung emphasizes the importance of writing up a proper agreement signed by each party’s lawyers and not just hoping for the best. This advice also goes for families who, Ms. Chung says, often insist they know each other well enough and don’t need to formalize anything.
“Let’s not blow up a family, but let’s get really specific,” she says. “What does it look like if somebody wants to move out? What is your fair share financially? Who does the work around the house?”
Shannon Tatlock, certified financial planner with Kevin R. Williams Financial Services Inc. at Sun Life Financial Investment Services (Canada) Inc. in Moncton, has some clients who have embraced the lifestyle of sharing expenses with friends and taking care of one another.
“It offers another way of living independently outside of family,” she says.
People staying put
While housing costs have increased in Moncton, she says it’s still “relatively affordable” and not as difficult to find vacancies, unlike other cities in Canada. She says even senior clients who are homeowners often prefer to rent as they get older to offload the maintenance and renovation upkeep that comes with owning.
“You can still find a brand new two-bedroom apartment for $1,500 a month,” she notes. “Some of our seniors may choose lower-end apartments knowing that the cost will increase over time.”
She concedes it’s more difficult to find a rental in the vicinity of $1,000 a month. She has some clients renting a house for affordable rates who want to upsize but are staying put due to concerns about rising rents.
For senior clients who require financial assistance, Ms. Tatlock has hosted family meetings in which their adult children realize they need to pitch in.
“It’s just not easy now. The parents are not capable of going back to work,” she says.
The toughest situation occurs with rocky family dynamics.
“We have seniors living on their own who probably shouldn’t be,” Ms. Tatlock says. “But what do they do? We try to encourage them to seek help from their family doctor.”
For more from Globe Advisor, visit our homepage.