Office towers, condos and apartment buildings in downtown Vancouver, on Jan. 19.DARRYL DYCK/The Canadian Press
For B.C., particularly those in Vancouver, the burden of housing costs keeps climbing. New data show that one in five, or 20 per cent of borrowers in the city of Vancouver, are spending at least half their household income on shelter costs.
More was known about the high cost of renting, but not as much was known about homeowners, particularly borrowers. In Vancouver, 18 per cent of renters are putting more than 50 per cent of their household incomes towards rent, according to 2021 census data analysis by Andy Yan, director of Simon Fraser University’s City Program.
“Obviously the vulnerability of renters is something we have talked about and needs to be talked about,” he says. “What I wanted to do was then look at the shelter costs of owners. And you would have expected their numbers to be smaller than renters because they have a gatekeeper, a.k.a. the lender, who has checks in place. So you would have expected that group to not be so vulnerable. That’s not necessarily the case.
What he found was that mortgage-holders in Vancouver, the University Endowment Lands district, West Vancouver and Richmond have a high shelter-cost-to-income ratio, while Coquitlam, White Rock, North Vancouver city and district, Surrey, Port Moody, Delta, Langley, Maple Ridge and Port Coquitlam are quite a bit lower. Pitt Meadows is the most affordable.
Percentage of households paying
30 per cent or more of their income
on housing*
Mortgage holders
Renters
Spending 30% to
50% of income
on housing
Spending 50%
or more
19.6%
20.7
40
20
Vancouver
39.2
21.1
35.6
20.7
Toronto
39.6
22.2
14.4
9.4
Halifax
36.7
21.7
23.6
15.8
Calgary
34.1
21.1
*Average monthly shelter costs, including mortgage payments or rent, property taxes, condo fees, electricity, heat, water and other municipal services.
MURAT YÜKSELIR / THE GLOBE AND MAIL, SOURCE:
STATISTICS CANADA; ANDY YAN, SIMON FRASER
UNIVERSITY
Percentage of households paying 30 per cent
or more of their income on housing*
Mortgage holders
Renters
Spending 30% to 50%
of income on housing
Spending 50%
or more
34.7%
19.6%
Greater
Vancouver
38.3
20.7
40
20
Vancouver
39.2
21.1
35.6
20.7
Toronto
39.6
22.2
14.4
9.4
Halifax
36.7
21.7
23.6
15.8
Calgary
34.1
21.1
*Average monthly shelter costs, including mortgage payments or rent, property taxes, condo fees, electricity, heat, water and other municipal services.
MURAT YÜKSELIR / THE GLOBE AND MAIL, SOURCE:
STATISTICS CANADA; ANDY YAN, SIMON FRASER UNIVERSITY
Percentage of households paying 30 per cent or more of their income on housing*
Mortgage holders
Renters
Spending 30% to 50% of income on housing
Spending 50% or more
34.7%
19.6%
Greater
Vancouver
38.3
20.7
40
20
Vancouver
39.2
21.1
35.6
20.7
Toronto
39.6
22.2
14.4
9.4
Halifax
36.7
21.7
23.6
15.8
Calgary
34.1
21.1
*Average monthly shelter costs, including mortgage payments or rent, property taxes, condo fees, electricity, heat, water and other municipal services.
MURAT YÜKSELIR / THE GLOBE AND MAIL, SOURCE: STATISTICS CANADA; ANDY YAN, SIMON FRASER UNIVERSITY
In the University Endowment Lands, half of the mortgage holders there pay 50 per cent or more of their average total household incomes on shelter costs. In West Vancouver, it’s nearly 40 per cent and in Richmond it’s 25 per cent, slightly higher than Vancouver’s 20 per cent.
The data arrive at the same time that insolvency firm MNP released its Consumer Debt Index that showed 52 per cent of British Columbians report that they are within $200 of not being able to pay their bills by month’s end. That was an eight-point increase since the last quarter, which is the biggest increase out of all the provinces.
“When you see 20 per cent of people spending 50 per cent of their income on shelter costs, mortgage and debt associated with their home, that’s high,” says Grant Bazian, Vancouver-based president of MNP. “We usually tell people to keep it below 30. That’s definitely cause for concern. In communities like Vancouver and Toronto where real estate is so expensive it will definitely be a problem.”
Because most people try to hang onto their homes, Mr. Bazian doesn’t see a lot of foreclosures happening. But anecdotally he is seeing a lot of homes for sale when he drives through West Vancouver.
Nationally, 7.3 per cent of homeowners with mortgages pay more than half their incomes on shelter costs, according to Mr. Yan.
In Toronto, it’s 15 per cent, which is also high. In Calgary it’s 7.8 per cent and in Halifax it’s 5 per cent. Shelter costs include mortgage payments, property taxes, maintenance fees, utilities and other municipal services.
If we look at all homeowners – with or without a mortgage – 13 per cent of Vancouverites pay half their income towards shelter. In Greater Vancouver, 10.6 per cent of all homeowners pay that amount.
Mr. Bazian said for some the combination of inflation and high interest rates is a tipping point.
“I can almost guarantee that this will have an impact for those renewing mortgages, and those watching their finances with a fine-tooth comb. Where is the money going to come from? It will definitely tip some people over the edge,” he says.
“[People] get lines of credit if they can, they use credit cards and payday loans – which is an obvious choice because they typically don’t look at your credit rating,” says Mr. Bazian. “People look wherever they can to get out of a bind, to family members et cetera, and you may see more repossessions of vehicles as well. You have these negative equity vehicle loans and that catches up to them as well.” While some saved up during the height of the pandemic, that money quickly disappears due to inflation, he says.
“Our census survey released July 10 said people are more anxious than ever about their debt situation. The wiggle room they had in the past is gone, so now they are forced to make decisions in their life. And with another raise on the interest rate, it will force more people to come face-to-face with their debt situation, and they can’t kick the can down the road any more. … It’s a small percentage, but more than you have seen in the past,” said Mr. Bazian.
Long-time Toronto mortgage broker Ron Butler said the high number of borrowers in Vancouver and Toronto who are cash-strapped does not surprise him. He’s seeing borrowers who will have to sell their homes – a relatively small number, but they are there.
“There are people who utilized a HELOC [home equity line of credit] who have had rates go from 2.95 per cent to 7.7 per cent in 15 months and there is a direct correlation to payments, so those payments have more than doubled,” says Mr. Butler.
“And those with a variable mortgage have seen payments increase automatically with the rate increases. They have seen a 50 basis points increase in six weeks with this last 25 basis points raise.
“Those variable rate clients thought when the Bank of Canada paused increases that they were safe, but these two increases back-to-back have convinced some of them that there can be several more increases this year, so the mortgage will become unmanageable.”
Reducing their payments is difficult, he says, because most fixed rates are within 30 to 40 basis points of the new variable rates. In cases of proven hardship only, the lender might extend the amortization period from 30 to 35 or 40 years, to help ease the burden. But for some, selling and down sizing is the best option.
Langley mortgage broker Alex McFadyen has some clients who are seeing their monthly payments increase by one or two thousand dollars.
“When this rate increase cycle started there was no indication we would be going up 3 or 4 per cent, let alone 4.5 per cent,” says Mr. McFadyen. “Until the fall of last year or the winter, most people said this won’t have a meaningful impact on their lives. Yes, it would cause some challenges, but it didn’t seem to have any meaningful impact.
“As of the June increase, I sensed a substantially higher amount of stress. I sensed the seams were starting to crack for some, and the realism of what was going on started to kick in for those folks with variable rate mortgages where the payment is locked in. I started to get more calls than ever from people suggesting they needed to refinance to set up an emergency fund – just a higher amount of concern from most people.”
Most people won’t see the impact for six months due to upcoming mortgage renewals, he says. Most of them will refinance, perhaps with a longer amortization, and a few will have to sell off their homes.
“But out of thousands of families, I’m only getting one of these [distress] calls every week or two weeks,” he says.
A contributing overall factor, says Mr. McFadyen, is that people just keep spending their money. According to the MNP report, half of British Columbians regret the amount of debt they’ve taken on in life.
“I would say the vast majority of people I meet don’t have much in the way of day-to-day savings, and most don’t have a good handle on their budget, and quite commonly I see people spending too much on things like vehicles and vacations and ancillary items and consumer goods. I don’t blame anyone or anything of that nature. It’s just a common occurrence.”