You may have seen this new billboard if you were cruising around Spadina Ave and Queen St W after May 17th. As sarcastic as it is, having your parents help you with entering the real estate market is the new norm, particularly here in Toronto. Wealth is beginning to shift generationally as parents help their children with down payments and, in some cases, even paying the mortgage.
The billboard was commissioned by the advocacy group, Canada Housing Crisis, a reddit-based community with over 13,000 members on the subreddit canadahousing. The billboards were crowdfunded, and have appeared in Ottawa as well as Toronto with plans for another to appear in Vancouver too. Though just a simple grassroots organisation, Canada Housing Crisis aims to push through the noise and grab our attention with these billboards. They push for drastic changes to the Canadian housing market and will continue to advocate for regulations such as doubling the minimum down payment on investment properties, making the bidding process transparent and ending double-blind bids, and introducing new taxes for vacant homes and short-term rentals.
As humorous and sarcastic as the billboard is, it brings attention to the out-of-control state the housing market sits in and the sad fact that if you weren’t lucky enough to be born into generational wealth, you’re going to have a hard time buying property in Canada, let alone places like Vancouver and Toronto where the average home price has surpassed $1 million.
Even with well-paying jobs, many young people and families are struggling with the down payment for these homes. Many are turning to their parents for help. Though the rising prices have barred many from entering the property market, for those that own their own home, equity has built up significantly. Many older property owners are able to reverse-mortgage their homes to help their children with down payments. This means they don’t have to dip into their savings.
With an estimated 70% of Canadian homeowners over the age of 65 being mortgage free, this method of generational wealth transfer is utilising the estimated $1.2 trillion equity in these properties to help many younger Canadians begin their own journey to own a home. A side note, that $1.2 trillion in equity is a huge increase from the 2016 estimate of $805 billion according to the Rennie Group.
With real estate prices continuing to climb, many older Canadians are pushing their children into the real estate market before it gets too late. But what if your parents aren’t lucky enough to be in a position to help you with the down payment?
It’s unfortunate but the Canadian government doesn’t have an answer for you. Frustration is climbing with billboards such as the one commissioned by Canada Housing Crisis as just one example of many Canadians fed up with the lack of action from our leadership.
Creative housing solutions such as the many we’ve advocated for here are one thing but down payments are going to continue to climb as prices increase. Even in a group the current down payments in Toronto are difficult to manage. Additionally, the blind bidding method forces many new buyers out of the market and drives prices up further.
The bottom line is that if you aren’t lucky enough to have wealthy parents, real estate is becoming a more and more difficult market to enter. While it may be easy to blame the pandemic, the reality is that the pandemic merely accelerated the market. It’s highly unlikely that it’s your fault you can’t afford a house. Even moving out into the suburbs and smaller towns isn’t an option.
With the current wage average, and it’s sluggish growth, compared to real estate prices, things look grim. According to Statistics Canada, the median total income for people between the ages of 25 and 34 was $41,700 in 2019. Even on a couple’s income, that would only equate to $83,400. Ratehub.ca states that you’d need an annual income of $175,230 to afford an average home in markets like Vancouver and Toronto. That’s if you were able to afford the minimum 20% down payment. Even saving diligently could take you years as long as you don’t have any emergency expenses. In Toronto, a down payment can take up to 24 years to save for!
Until drastic changes are implemented, things aren’t looking like they will get better. While co-ownership is one way to ease the burdens of down payments and home ownership costs, GoCo would prefer it wasn’t only an option for affordability. In an ideal world, co-ownership would be a choice that buyers make to create and build an intentional community rather than just a means to enter the real estate market.
Until then, GoCo will continue to lead co-ownership in Toronto, with the ultimate goal of it being a choice in the future rather than a necessity right now.