Dream of homeownership fades for many Canadians
Trish Rhéaume was visibly moved when Jimmy Carter handed her the key to her new home. Rhéaume, a single mother of a 16-year- old daughter, was one of six families who were housed by Habitat for Humanity Canada in Windsor, Ontario. Proud volunteers and guests watched the former president, dressed in blue jeans and a baseball cap, move from house to house to welcome new homeowners.
It was hard not to be compassionate. Known celebrities and dignitaries joined a crew of volunteers who flew in from across the country and celebrated the end of a successful undertaking. The event could not mask, however, the fact that despite our economic recovery and low interest rates, Canada is facing a new reality: homeownership can no longer be taken for granted by middle-income Canadians.
Several factors have contributed to this situation. Canada’s demographic makeup has changed. Whereas half a century ago, the majority of Canadians lived in traditional households, today families are markedly different. According to Statistics Canada, some 12 percent of Canadian homes are headed by a single parent, and 16 percent of Canadians live alone.
Our mortgage system, whose origin dates back to the Post-World War II era, still regards 32 percent as a mark of how much a household should commit out of their annual income toward mortgage payments. With the high cost of housing across the country, not many single-headed households can afford a home. Another fundamental change took place in our employment outlook. Despite a relatively low unemployment rate, long-term security has faded from our workplace. A key ingredient necessary to qualify for a mortgage has simply gone.
Not knowing what their future employment prospects entail, potential homebuyers cannot commit themselves to a long-term mortgage. Bankers, too, following lessons learned from the U.S. mortgage meltdown, fearing a default, are more cautious than ever prior to lending a large sum of money.
The product has also changed. Today’s homes are bigger, better equipped, and much more expensive to keep warm and cool. Labour and material costs have risen in the past quarter century, not to mention cost of land, the infrastructure and taxes. Living in a suburban home may also entail a long commute and costly fuel charges and likely a second or even a third car.
Did the dream of homeownership fade away for modest and middle-income Canadians for good? Not really, but it has definitely been transformed. We are unfortunately edging towards the European and the Japanese homeownership models.
Some Canadians are likely to spend all or most of their lives in a rental unit. Others are likely to wait longer, save harder or be assisted by their parents before buying. But most will have to pay most of their adult life for their homes, a prospect that will leave them with less disposable income.
Many might have to forgo the notion that their first home will be a single-family detached home. It is given that most Canadians living in or near urban centres like Vancouver will reside in apartments. Large suburban homes will be the luxury of a few.
Should, and can, governments play a role in keeping homeownership available to all? They should. In the past two decades, governments have reduced their participation as housing providers to a minimum. The burden of building and maintaining housing stock was avoided. This mindset must be revisited. At the very least, governments need to do what they were elected to do: lead. Questions need to be asked whether the structure of our mortgage system adequately serves Canadians and whether it needs reform. The product, the home, also needs rethinking. The zoning of many towns has been written to encourage low-density, single-family homes which yield the highest tax revenues. The need to examine other planning models is evident. Compact developments made of townhouses and apartments are likely to contribute to lowering the cost of housing.
Habitat for Humanity is making an admirable contribution to solving the housing problem in Canada. What we need, however, is to examine and eliminate the root cause of the housing affordability crunch.
Avi Friedman will be speaking at the Urban Development Institute luncheon and seminar on June 16. See here for more details.
Reposted from Urban Development Institute with permission from author.