Despite some lower prices recently, many young Canadians are still far from able to afford to buy a home according to a new report.
Generation Squeeze says that in many cities there would have to be a major drop in home prices or a significant rise in wages to enable millennials to enter the housing market.
For example, Vancouverites would need their typical full-time wages to increase to $200,400 or four times their current level; or house prices would need to fall by three-quarters (a $795K drop) to make homes affordable (based on CMHC’s measure of households spending no more than 30% of their pre-tax earnings on housing.)
Across Canada, a wage increase to $93,400 a year, almost double current levels; or a home price drop of around half ($223,000) would be required.
“Despite recent nominal declines in housing prices compared to previous years, the gap between the cost of owning a home and the ability of younger Canadians to afford it is at critical levels. If housing markets are levelling out, they remain untenably high,” said Dr. Paul Kershaw, lead author of ‘Straddling the Gap: A troubling portrait of home prices, earnings and affordability for younger Canadians’, and founder of Generation Squeeze.
The report says it now takes a typical young person 13 years to save a 20% down payment on an averaged priced home in Canada, compared to the five years it took when today’s aging population started out as young adults around 1976.
NHS needs extending
Generation Squeeze is calling on the federal government to expand the National Housing Strategy from the current pledge to support 530,000 of the most vulnerable Canadians, to an estimated 1.2 million who are in core housing need.
“A second phase of the National Housing Strategy must be launched to ensure all Canadians can afford a good home — whether renting or owning — by addressing failures in the broader housing market,” said Kershaw.
Generation Squeeze is also calling for the government to embrace “Homes First” as a guiding principle, with policy targets that would ensure that home prices don’t grow faster than local earnings.