As house prices soar, is home ownership in Canada becoming something only the rich can afford?
Canada poised for 'pivot in how we value home ownership': Armine Yalnizyan
Canada's consistently high house prices have some people worried that finding your dream home could become a pipe dream for ordinary Canadians.
"If we don't do something about it, our mindset is going to change," said Garrett McPhee, who has been trying to buy a home in his native province of Nova Scotia for around a year.
"Things like owning a home or even having a family are going to be regarded as things that only rich people can do, and regular working people can't do those things," he told The Current's Matt Galloway.
"I think we're on that path."
In December, the Canadian Real Estate Association warned that the average house price in Canada is expected to hit $620,000 throughout 2021. By this month, the CREA reported that home sales in February were up 39.2 per cent compared with a year ago, and the average price had hit $678,091, up 25 per cent from a year earlier.
The increases are in part fuelled by the pandemic, which has driven people out of places like Toronto and Vancouver, and driven up prices in the areas they're moving to. Provinces in eastern Canada, which have fared better in the pandemic, have seen an influx of people moving there permanently.
McPhee grew up in the 90s a four-bedroom Cape Breton house that cost his parents $29,000.
Now, his budget for a two- to three-bedroom property in Halifax runs to $400,000, but the market is so competitive that realtors will tell him not to even bother looking at some places.
McPhee said that's "soul crushing."
"My dad was the manager of a bowling alley.... I make, you know, considerably more money than that," he said.
"But by any measurement, when you actually compare the two lifestyles, I'm doing much worse and it doesn't really make sense."
Home ownership shouldn't equal success: economist
Economist Armine Yalnizyan thinks that Canada is "poised for some kind of a pivot in how we value home ownership."
"We've been living under the ethos of home ownership as the best thing. The ownership society concept was brought in about 40 years ago," said Yalnizyan, an economist and Atkinson Fellow On The Future Of Workers.
That's led to the view that not being able to buy a home is "somehow failing in being an adult," especially for young people, she said.
"But adulting doesn't require home ownership to be successful."
In a report last week, housing-market watchdog the Canada Mortgage and Housing Corporation (CMHC) cited five areas — Toronto; Ottawa; Halifax; Hamilton, Ont., and Moncton, N.B., — where housing markets had high vulnerability to instability, but decided overall that the national housing market faced a moderate risk. However in February, the Bank of Canada warned of early signs of overheating. A recent Reuters article also declared that "Canada's red-hot housing market has become a bonfire."
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In May 2019, CMHC's president and CEO Evan Siddall warned that Canada's history of glorifying home ownership isn't sustainable.
"This party ultimately comes to an end, and the people who are going to get hurt are young people," he told BNN Bloomberg.
But even if prices fall after the pandemic, Doug Porter, chief economist at the Bank of Montreal, doubts there will be any significant, long-term change in Canada's ownership aspirations.
"We've seen cycles before. We had a boom in home prices in the late 1980s and then a crash in some cities in the early 1990s that, you know, frankly, lasted about a decade," he told Galloway.
"I believe that the desire to own a home won't be dimmed at all."
Yalnizyan agreed that "the desire won't be dimmed for a whole host of reasons ... but the reality will be that there will not be enough houses to buy affordably."
If the cost of buying a home moves further out of reach for many, that will affect Canada's ability to attract talent and workers, she warned.
"If we wanted to, we could create the place where everybody wants to move to," she said.
"And believe me, we are going to be in competition with all the other rich nations … so we need to make our country a people magnet."
Majority of country can still afford to own: minister
Federal Minister Ahmed Hussen says he believes home ownership is "still within reach for many Canadians and in the majority parts of the country."
"It is also fine to live in a rental unit and that's OK as well. There's nothing wrong with that," Hussen, the minister of Families, Children and Social Development, who is responsible for the Canada Mortgage and Housing Corporation, told Galloway.
Hussen cited the federal government's efforts to make the housing market more accessible, including the national housing strategy introduced in 2017. The 10-year plan commits $70 billion (an increase from the original $40 billion) toward building affordable housing and reducing homelessness.
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He also pointed to the First Time Home Buyer Incentive program, by which the CMHC can contribute up to 10 per cent of the price of a buyer's first home if certain conditions are met.
The program was initially criticized for limiting eligibility to people hoping to borrow no more than $480,000, well below average prices in major urban markets. In Sept. 2019, Prime Minister Justin Trudeau pledged a future expansion of the program to include homes up to $789,000 in value, but the CMHC website still directs to guidelines that cap the full loan at $480,000.
Hussen also pointed to the Rental Construction Financing Initiative, which offers low-cost loans to spur the construction of mixed-income rental units.
"The Rental Construction Financing Initiative used to be about $13.75 billion. In the last fall economic statement, it was increased to $25.75 billion," he said.
The program was first introduced in 2017, and has been expanded in subsequent budgets, but advocates say it does not adequately address affordable housing needs.
Last week, a research report from RBC Economics urged policymakers to consider all options to bring house prices under control — including removing the sale of primary dwellings from capital gains exemptions.
Hussen said the federal government is "not considering that."
But he said, "every other day, we're making announcements in major, major urban centres, but also in rural and northern communities as well."
"There's always more to be done."
Written by Padraig Moran. Living Conditions, a special episode of The Current looking at the cost of buying a home in Canada, produced by Lara O'Brien, Vanessa Greco, Kate Cornick, Alex Zabjek and Celeste Decaire.
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