As interest rates rise, Canada’s housing market is showing signs of cooling off. But the idea of owning a home – and even renting it – still makes some people feel overwhelmed.
Despite earning what he describes as a “very good” one-time income and having a down payment ready, government official Craig Dykeman, 54, says he is struggling to find a home he can afford near his community of Jemseg, NB.
Dykeman currently lives with his mother in a house she owns an hour west of Moncton, but he hopes to soon buy a place to live with his daughter.
In addition to mortgage costs, he is concerned about covering related expenses such as insurance and property tax, as inflation raises the cost of living.
“It doesn’t have to be a fancy house, but a house I can live in… where I have enough so I don’t have to worry about groceries or heat,” he said. Cross Country Checkup.
Politicians, economists and advocates attribute the heated market to a lack of supply. Many say what is needed is more affordable housing.
But as more people find themselves pushed out of the market, defining what is affordable can seem murky, says Julieta Perucca, deputy director of The Shift, a nonprofit that advocates that housing be seen as a human right and not as a commodity.
“I feel like we’re currently using our imaginations to define affordable housing, unfortunately,” she said.
“Affordability right now, and the price of our housing, is largely driven by the market itself. And that’s why we see housing costs have far exceeded family income.”
Affordable defined as 30% of pre-tax income
The Canada Mortgage and Housing Corporation (CMHC) defines housing as affordable when it is less than 30 percent of a person’s pre-tax income and can include subsidized housing, market-rate rents and property.
Assuming a pre-tax income of $55,700 – the average family income before taxes by 2020, according to Statistics Canada – the average family would have just under $1,400 a month to spend on housing.
For Eric Burnet, a social worker, buying a house in Hamilton, where he previously lived with his partner, was a daunting prospect. At the time, the two were paying “a little” rent for a “right place” as they watched house prices soar, he said. Check.
“We’ve just started our careers. Like, we’ll be in our 40s when we can afford something like this,” he recalled.
So Burnet and his partner decided it was time to take the leap and look elsewhere. They moved to Sydney, NS, first subletting an apartment and eventually buying a house this past October.
The move has worked well for them, he says, but he’s still worried about accessibility elsewhere.
“I feel like I have a good income and yet if I lived in Toronto I would be broke,” he said. “I don’t know how people do that.”
Perucca believes that the 30% figure should be updated and that the calculation of housing costs should take a more sophisticated approach that considers affordability in relation to income.
For example, affordability for a dual-income family that has extended family support should be calculated differently compared to a family with a single parent who works two jobs and has to pay for a full day of childcare.
“I think a lot of us are being left out of this definition of accessibility,” Perucca said. “Many of us are experiencing a housing market that does not meet our needs.
“But I don’t think people are feeling it as keenly as those low-income groups, who in Canada are also disproportionately people of color, indigenous people [and] marginalized communities”.
Burnet says the challenges with housing affordability are systemic in nature and need to be addressed through greater investment in social housing, increased housing and better public transport in cities. Real estate speculation and prices should also be limited, he added.
“Housing is essential,” Burnet said.
Access to safe and secure housing is crucial: economist
Addressing housing affordability will require different responses to different scenarios, says Tsur Somerville, an economist at the University of British Columbia’s Sauder School of Business.
“Much of the focus on housing affordability is focusing on people’s ability to access home ownership,” Somerville said.
“I think the key issue should be people’s ability to access safe and secure housing of appropriate size and decent quality.”
This means ensuring that low-income families have access to subsidized options and that the overall housing supply is adequate.
“What that means is it’s money and it’s supply – and money is taxes, and supply is a change in the built environment,” Somerville said, referring to the need for greater density. “People are very resistant to that.”
Dykeman recently looked to buy a used trailer that he could move into a piece of property he owns.
It was in the market for 11 hours, he said.
By the time he heard back from the seller, he was sold – too much to ask.
Written by Jason Vermes with files from Steve Howard and Abby Plener.