Non-profit Group, Generation Squeeze, completed a study showing the tremendous gap between millennials earnings and house prices. The study titled, “Straddling the Gap” found that for the average 25 – 34 year old Canadian to own a home, average house prices would need to be slashed in half ($223,000) or average earnings would need to almost double to $93,400.

Along with the Canada Mortgage and Housing Corporation (CMHC), Generation Squeeze has adopted an affordability target of 2030. Affordability is assessed by CMHC standards as spending less than 30% of pre-tax earnings on housing, and the ability to carry an 80% mortgage on an average priced home. According to the CMHC, Canadian household debt reached a record high at the end of 2018 even as mortgage activity slowed down.

Saving for a 20% down payment can take millennials closer to 13 years instead of the average 5 years that their parents needed to save in 1976. The report also confirmed that this problem is not just in urban centres but has spread across the country.

“It’s not just Toronto or Vancouver,” said  Paul Kershaw, a policy professor at the University of British Columbia. “The gap is large in Victoria. The gap is large in Kelowna. It’s large in multiple cities like London, Kitchener, Ottawa and Hamilton. There’s a gap that’s problematic in Calgary, Fort McMurray, Edmonton, Halifax, Montreal, etcetera. Even Manitoba has crossed the threshold where home prices are challenging for younger Canadians.”

A handful of provinces remain “relatively affordable” — Saskatchewan, Manitoba,New Brunswick, Newfoundland & Labrador and Nova Scotia — but the report stresses that for more than 90% of Canadians, this is not the case as less than 10% of the population reside in an affordable province.

Generation Squeeze suggests non-housing costs such as expenses related to child care, student debt and transit costs can play an important role. As renting becomes a longer term reality for millennials, the group suggests that the cost of renting be more aligned with earnings and that more “purpose-built rental housing” is made available. For markets in Saskatchewan, Manitoba and much of the Maritimes where affordability is still a reality, the report suggests measures to ensure it is not lost there too.

The report suggests a new housing policy framework, including a second phase of the National Housing Strategy, a timeline of 2030 for affordability and a “homes first” policy.

WHERE YOU LIVE: Prices would either need to drop by the amounts listed or earning would need to increase to these amounts for homes to be affordable for the average 25 – 34 year old Canadian.

Location Price Drops Required Earnings
Metro Vancouver -$795,000  $200,400/year
Victoria -$413,000 $134,000/year
Kelowna -$239,000 $100,000/year
GTA -$523,000 $150,000/year
Hamilton -$284,000 $107,000/year
Kitchener -$206,000 $107,000/year
Ottawa -$131,000 $78,200/year
Montreal -$131,000 $72,400/year
Calgary $148,000 $88,000/year
Edmonton -$76,000 $72,000/year

 

Source: CTV News