Good news, frustrated Canadian would-be homebuyers: We now have a target for how much you should wish house prices to fall by: 50 per cent.
Unless you’re in Toronto, in which case you should be hoping for house prices to fall by an improbable two-thirds. Or Vancouver, where you’ll need house prices to fall by what would be a shocking 75 per cent.
That’s according to research from Generation Squeeze, a campaign run by a University of British Columbia professor drawing attention to the cost-of-living problems facing young Canadians today.
Watch: Vancouver tops the country for two-bedroom rental prices. Story continues below.
In a new study, the group found that for housing to be affordable for young Canadians aged 25 to 34, the average house price would have to fall by $223,000, or nearly half. Either that, or typical full-time earnings for this group would have to double to around $93,400.
The study used a common rule of thumb to define affordable housing ― no more than 30 per cent of gross income. By that standard, the median house price in Toronto would have to fall by $523,000, or about two-thirds of its current value, to be affordable for millennial homebuyers. In Vancouver, prices would have to fall by $795,000, or about 75 per cent.
But unaffordability “is not just a Metro Vancouver or (Greater Toronto) problem. (It) is evident in towns across B.C. and Ontario, plus cities in Alberta, Montreal, Halifax. Even Manitoba has begun to cross the unaffordability threshold,” Paul Kershaw, a director at UBC’s School of Population and Public Health and founder of Generation Squeeze, wrote in an email.
The group’s report lays out a number of “foundational commitments” it’s urging Canada’s political parties to adopt ahead of this year’s election. Among other things, it urges policymakers to expand the existing National Housing Strategy to cover a greater number of households in need, and to back Canada Mortgage and Housing Corp.’s goal of ensuring that “everyone in Canada has a home that they can afford and that meets their needs” by 2030.
But to do that, the report argues, “we must fundamentally shift how we treat housing and residential land. ... We need to protect it for locals, and against egregious uses by money launderers, cheats, speculators, and those parking money in empty homes.”
Uneven land use
Over the years, Canada’s cities have developed a very uneven distribution of land, with a small group of detached home owners occupying more space than a much larger group of residents living in high-density housing.
In Vancouver, the one-third of residents who live in detached homes occupy three-quarters of the residential land in the city. Fully two-thirds of residents are squeezed into one-quarter of the city’s land area. Toronto’s situation is similar, Kershaw said.
The solution, Kershaw said, is to open up low-rise neighbourhoods for higher-density housing ― an idea that has been gaining traction among urban planners and developers. But it invariably runs into opposition from homeowners worried about the character of their communities being compromised.
“It should not be lamented that prices have stalled, but celebrated.”
Kershaw suggests that federal transfers to cities for housing and infrastructure be tied to a requirement that cities rezone single-family home neighbourhoods for higher density.
“That would make it easier for mayors to resist NIMBYism in their communities,” Kershaw said.
The Generation Squeeze report also suggests government manage people’s expectations when it comes to housing. Homeowners shouldn’t expect that their houses will turn into winning lottery tickets, and landlords should expect rents that allow only for a “reasonable profit,” Kershaw said.
In Kershaw’s view, the recent slowdown in the housing market is good news, and not a call for panic as some in the real estate industry have implied.
“It should not be lamented that prices have stalled, but celebrated,” he said.