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A new study shows it takes the average Canadian 12 years to save for a down payment to purchase their own home, even longer if you live in B.C.
The new research, released by The Code Red campaign, says it takes even longer for some B.C. residents to save for a home, up to 23 years for those in Metro Vancouver. It used to take an average of five years to save a down payment.
“It’s as if you need to start saving your down payment while in child care,” said Dr Paul Kershaw, the study’s first author, and policy professor at the University of British Columbia. “Too bad child care already costs the equivalent of another mortgage payment.”
The release of the study marks the beginning of a year-long campaign to ease the housing squeeze, a campaign run by Generation Squeeze.
The typical 25 to 34-year-old in British Columbia earns $9,000 less for full-time work today compared to 1976 (after inflation), meaning it takes residents much longer to save for a home. The situation is dire in Metro Vancouver as only 15 per cent of homes cost less than half a million dollars and provide access to at least three bedrooms. Half a million dollars is twice the cost of an average home in the region back in 1976-1980, after inflation.
“Politicians can no longer claim that housing is unaffordable in only a select few neighbourhoods,” explains Dr Kershaw. “Our latest study shows that young people’s wages have become so disconnected to housing prices that there are few places to escape the problem in the province, or even across the country”
The study calls on the government to rethink the Canadian housing policy and offers 10 solutions.
1. Homes first. Investments second.
2. Tax housing wealth to slow down housing price increases
3. Don’t just focus on taxing the housing wealth of foreign investors or speculators
4. Try to tax net housing wealth, not just gross wealth
5. Recognize low-interest rates cut both ways for younger generations
6. Age matters. But the current treatment of age in housing policy is outdated
7. Revisit zoning for single detached homes in housing hot spots like Vancouver and Toronto
8. More rental accommodation
9. More below-market housing, but…
10. Don’t let child care, parental leave, transit, etc. add second, third & fourth mortgage payments
Mortgage payments require considerably more work in B.C. according to the study. The Average monthly mortgage payments between 1976 and 1980 equalled $1,583, compared to $2,327 in 2006-2010. By 2014, the average monthly mortgage payment reached $2,487. An extra 35 hours of labour a month are required to cover this average mortgage or 2.5 months of extra work per year, compared to a generation ago. The amount of extra work required to pay an 80 per cent mortgage on an average Metro Toronto home is similar to British Columbia.
By 2014 in Metro Vancouver, the average monthly mortgage payment required from a young adult starting out in the housing market reached $3,555, compared to $1,991 in 1976-80 period.
As a result, over five months additional labour market time each year are required to pay off an 80 per cent mortgage on an average home, compared the work time required back in 1976-1980.
The study acknowledges that it is difficult for government policy to solve housing unaffordability problems, especially while protecting property values for existing homeowners.
“That is why it is imperative for all British Columbians, young and old alike, and their political parties, to turn their attention in advance of the 2017 election to the broad range of costs squeezing young adults. We can help ease the housing squeeze by no longer tolerating child care, parental leave, transportation, etc. adding up to second, third and fourth mortgage payments,” concluded Dr Kershaw.
The full report is available online here.
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