Canada's Prime Minister Justin Trudeau applauds after Deputy Prime Minister and Minister of Finance Chrystia Freeland delivered the fall economic statement in the House of Commons on Parliament Hill in Ottawa, on Nov. 21.BLAIR GABLE/Reuters
The federal Liberals took another stab at helping on housing in the fall economic statement this week, with an end to income tax deductions for Airbnbs and other short-term rentals in some jurisdictions, and billions in low-cost loans to build rentals.
These are common sense and low-hanging fruit measures. But they are still far too little to address the massive gap that’s opened in Canada between the well-housed, and the increasingly desperate – with or without a mortgage.
It’s not only about the importance of new supply, as we might gather by listening to our politicians. We’re never going to build all we need to achieve any kind of balanced market.
It’s also about demand. While Canada is welcoming nearly one million permanent and non-permanent newcomers every year, the housing market is also increasingly controlled by those at retirement age, or older. People who have been in the housing market for decades have a jump on everyone else, and the calls for addressing this generational inequity are only going to get louder.
First of all, even if you are “in” the housing market, the situation is dicey, as anyone who faced a mortgage renewal in the past 18 months can attest.
Inflation is being reined in. But still rising are hefty items such as groceries, rent and especially mortgage interest costs. Mortgage interest payments rose by 30.5 per cent in October, year-over-year. And the pain is not over. Between 2024 and 2026, almost 60 per cent of outstanding mortgages at chartered banks are due to renew and could face a sharp increase in payments.
That means earning $100,000 a year is not what it used to be. And even as British Columbia spends hundreds of millions of dollars to provide capital grants to non-profit organizations so they can buy up residential buildings to protect renters, the Vancouver Sun has found people earning six figures being evicted and going homeless.
Most know the average age of a first-time home buyer has been creeping up in Canada. Now, it’s 36, compared to 29-years-old one decade ago.
But also, the age of all homebuyers in general has been going up. Even with turbulence in the market and falling prices in some markets, those with means and previous real estate purchases still appear to believe housing is finite, and a good investment. Some repeat buyers can pay in cash, an especially useful position in an era of higher interest rates.
In the United States, where there is more data available – and which faces similar circumstances – the National Association of Realtors says first-time buyers now make up 32 per cent of the market, well below the historical norm of 40 per cent.
The U.S. association also said the typical first-time buyer is 35 years old, while the typical repeat buyer’s age – now a much larger part of the overall market – is 58 years old. The Washington Post headline on these stats blared: “Baby boomers are buying up all the houses.”
Canada doesn’t have the same type of detailed national data. But in B.C., the average age of a buyer who wasn’t buying a home for the first time was 48 years old in 2019, according to Statistics Canada. That average age has almost certainly gone up since then.
Now, of course, Canada’s overall population is aging. Seniors don’t just invest in housing – they of course have to live somewhere. They are often stuck, too, wanting to move but seeing little in the way of an affordable path to downsize. The pandemic has understandably heightened concern about moving into any kind of institution. Real estate will be inherited by some lucky younger generations, eventually.
And in the end, much of the wealth of many Canadians is tied to their homes – and sometimes real estate investments.
But overall, the purchasing power of those who got into the housing market in past decades has grown disproportionately large. This is not a recipe for social stability.
Canada has always been a place where a well-paying job reliably meant a chance at homeownership, or a solid place to rent. Resentments will build as more people clock in and out in this huge, cold country, but find housing security still evades them.
We need to push our systems to provide working-age people, students and immigrants a roof over their heads. Despite this federal Liberal government saying it’s not trying to drive down home values, the astronomical prices of recent years do still need to come down. And policies need to be rewritten to make owning a house more about having a place to live than a place to park cash.
Otherwise, future generations will have to epically readjust from our very Canadian expectations on housing.