Average home prices in Canada would need to drop by $223,000 in order for a millennial with an average salary to find it affordable, according to a new report.
The report, which was conducted by non-profit group Generation Squeeze and is titled “Straddling the Gap,” uses the definition of housing affordability outlined by the Canadian Housing and Mortgage Corporation (CMHC): less than 30% of an individual’s pre-tax income is required to cover housing expenses. Affordability is also determined by the ability to cover an 80% mortgage — which assumes a 20% down payment — on an average-priced home.
If average home prices across the country aren’t magically dropping by hundreds of thousands of dollars, there’s another way millennials can hope to achieve affordability: make at least $93,400 a year, or nearly double the current average salary, the report said.
Contrary to popular belief, it’s not just millennials in Toronto and Vancouver who are struggling. More than 90% of the population live in unaffordable markets — e.g., where more than 30% of average earnings are required to cover housing costs. The exceptional provinces are Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Newfoundland and Labrador.
In Vancouver, home prices would need to drop $795,000, or three-quarters of the current average value, while homeowners would need to earn at least $200,400 annually. Toronto homeowners would need to see prices drop by $523,000, or increase their earnings to $150,000 a year.
The affordability gap is wide in other major cities, too.
“It’s not just Toronto or Vancouver,” said Paul Kershaw, the study’s lead author and 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, etc. Even Manitoba has crossed the threshold where home prices are challenging for younger Canadians.”
There’s no quick fix for this problem, said the report, which emphasized that policymakers need to prioritize housing affordability solutions.
“It’s important to recognize there is no silver bullet that will solve Canada’s housing problems,” the report reads. “Instead, silver buckshot is needed to address these issues across several fronts.”