Home ownership now more difficult for first-time buyers: How can municipalities help?
It’s getting harder to buy a home in Montreal. First-time buyers are facing a triple whammy of rising home prices, rising interest rates, and tighter mortgage restrictions. With Montreal’s rate of home ownership already one of the lowest in the country, the Greater Montreal Real Estate Board (GMREB) is calling on municipalities to do more to help renters become homeowners.
According to GMREB spokesperson Daniel Dagenais, municipalities have the power to create programs to help families and first-time buyers who want to own their homes.
“It has an impact on quality of life and the ability of their citizens to build wealth,” Dagenais said. “It’s a benefit for municipalities just like it is at the provincial level or the federal level.”
Home ownership is one of the primary ways middle-class Canadians build wealth, yet only 55 per cent of Montrealers own their own home — well behind the provincial average of 61.2 per cent and the Canadian average of 69 per cent.
Some disciplined savers are able to rent and put the money they aren’t spending on home maintenance in stocks or other investments, Dagenais said, but home ownership acts like a forced savings plan for the rest of us.
“Renting is good when you don’t know where you want to be, or (when) it’s a transition,” he said. “But renting for 10 or 15 or 20 years … there aren’t too many people who are renting who have accumulated wealth.”
Dagenais said low rents entice many Montrealers to put off buying a home, but although they may intend to put money aside, most people won’t save as much money on their own over a five- or 10-year period as they could build up through home equity. And rent prices increase over time, whereas homeowners can look forward to the day they become mortgage-free.
Nearly half of Canadians say they live paycheque to paycheque. Most are able to set aside what they need for the mortgage or rent payment, but most people don’t save as much as they should. A 2016 study by RateHub found that 61 per cent of Quebecers save less than 15 per cent of their income, and a 2015 study by Léger Marketing revealed that a quarter of us aren’t saving anything at all.
The disparity between a lifelong renter and a homeowner can be especially pronounced in retirement. Even if the rent remains low, seniors may have trouble making ends meet if they haven’t been able to save a substantial amount for their retirement. Homeowners, on the other hand, have an asset they can refinance or sell if the need arises.
But Dagenais said new mortgage rules, combined with higher prices and climbing interest rates, are making it harder than ever for renters to break into the real estate market. Some buyers can settle for a smaller, less-expensive house, but for those already looking to buy at the lower end of the market, the changes may rule out home ownership as an option.
“There are people who were looking to buy a condo at $240,000 who now only qualify at $160,000, and at that price it is not at all in the same neighbourhood — or maybe they can only afford one bedroom instead of two,” Dagenais said.
With the Nov. 5 municipal elections just around the corner, Dagenais is hoping mayoral candidates will come forward with big ideas to improve home ownership rates in the Montreal region.
For example, the GMREB would like to see more tax breaks for families who need to move to a bigger home, as well as first-time buyers. For example, municipalities could offer first-time buyers and families a discount of 50 to 100 per cent on municipal taxes in the first year after purchasing a home, which would gradually decrease in the following years to offset some of the initial expenses of becoming established in a new home.
The GMREB would also like to see municipal leaders consider reimbursing a portion of the land transfer tax, popularly known as the “Welcome Tax.” In certain provinces like Ontario, firsttime buyers are exempt from all or part of the land transfer tax.
Similar municipal incentives to support first-time buyers have been successfully implemented in places like Quebec City, Laval and Montreal, but programs are often limited to new construction or specific neighbourhoods. Many West Island, Off-Island and South Shore communities have no such incentives.
“Municipalities have the power to create programs to increase home ownership,” Dagenais said. ”Anything we can do to improve the affordability and availability of houses for everyone is a plus.”