I rented a room in a house with four other guys when I went to journalism school in Ottawa. And then it was five others. And then it was six.
Friends and siblings showed up for visits that turned into long-term stays. Bonus roommates – how great is that?
It was only a single year for me, so no big deal. But I did leave with the feeling that I was permanently done with roommates. Today, that attitude is a luxury.
Season Eight of the Stress Test personal finance podcast for Gen Z and millennials starts with an episode on the new roommate reality: young adults in their late 20s and 30s are living together as roommates because solo living is unaffordable.
The average rent on a one-bedroom apartment hit $1,889 in September, up close to 10 per cent over the previous 12 months. Meanwhile, the average hourly wage was up 5 per cent on a year over year basis in September. We’ve seen rent hikes outpacing wages for months on end.
You may have heard of an old rule that housing costs should account for 30 per cent of gross income. This threshold needs to be increased to reflect today’s housing market, but let’s not ignore the danger of normalizing the high cost of housing. If you spend $40 to $50 of every $100 in gross pay on housing costs, there’s not much left to save for near-term emergencies and longer-term goals like buying a house or retirement.
Solutions to expensive housing include living with family until you get married, as many cultures do. Moving to cheaper locations also helps, but there’s a definite upswing in the number of people living with roommates. Statistics Canada reports that households with roommates accounted for just 4 per cent of the total in 2021, but the growth rate was exceptional at 54 per cent.
It’s not just 20- and 30-somethings who are living with roommates. During the summer, I wrote about a network set up to help retired single women find affordable shared rental accommodations.
Lower housing costs could stop the growth in the number of people seeking roommates, but it’s not realistic to expect big drops in rents or mortgage payments. High costs are the new normal in housing, and that means more people living with roommates. Ten years from now, will only affluent singles be able to live the solo lifestyle?
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Rob’s personal finance reading list
Canada’s favourite credit cards
If you’re looking for a new credit card or want to see how your existing cards compare, check out the Canada’s Choice 2023 winners presented by RewardsCanada. Favourite cards in a variety of categories, as voted on by people like you. TD’s Aeroplan-linked Visa cards score well.
From owner to renter, with no regrets
A women who was struggling to pay her mortgage sold her home and now rents. “It’s the best thing I’ve ever done for myself,” she said.
Craving more TV?
If you’re in a mood to shuffle your streaming services, check out this comparison of Crave to Amazon Prime, Netflix, Disney Plus and more. Crave is pricey but there’s value.
Advice for executors
This newsletter has looked a few times recently at the hard job of being an executor for the estate of a relative or friend. Here’s some welcome practical advice on how to deal with banks as an executor.
Ask Rob
Q: There seems to be a lot of discussion about deferring Old Age Security and Canada Pension Plan benefits, but I haven’t noticed any advice about how far in advance you should to apply. My wife and I had deferred taking OAS for several years but decided it was finally time to start and completed an on-line application in June, expecting the payments to start soon after. No such luck. After waiting for two or three months, we called the Service Canada helpline and were advised that while there was a record of our application in the works, we should expect 150 days processing time for our application. Apparently, this is the standard for deferred OAS applications. Had we known this, we would have submitted our applications earlier and we recommend people in similar situations adjust their planning accordingly in order to avoid the extended delay in receiving their monthly OAS payments.
A: I think readers approaching retirement will find this information helpful, so thanks for writing. In a column I did recently on starting CPP and OAS, there’s a suggestion to apply for benefits three to six months in advance of when you want to start. It sounds like six months is a good rule to follow.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Tools, Explainers, Guides and Charts
If you’re affected by the Underused Housing Tax, you must file a return and pay the tax by Oct. 31. The UHT is a 1 per cent levy on the ownership of vacant or underused housing. Here’s an overview of the UHT from the federal government, and here’s a bulletin from the accountants at Andersen LLP.
The Money-Free Zone
I just finished the book Stay True by Hua Hsu and have been thinking about it a lot because it’s so wise and sad. The book, a Pulitzer Prize winner, is the author’s recollections about his university days and friendship with a young man who is senselessly murdered in a robbery. Next up on my reading list is Colson Whitehead’s latest, Crook Manifesto. Loved the first segment of this particular story arc, Harlem Shuffle.
Watch this
University of Calgary economics professor Trevor Tombe on how high interest rates hurt young people the most. I came to the same conclusion.
On social media
A smart question about real estate investing from blogger and financial planner Robb Engen.
In case you missed these Globe and Mail personal finance-related stories
- Overwhelmed by all the negative news? You might need financial therapy
- Now more than ever, it’s time to get comfortable with risky portfolios for education savings
- Are Canadians saving less for retirement?
- Five ways grandparents can help grandkids financially other than contributing to RESPs
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be child-free or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money – you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home down payment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
