FOR THE YOUNG, HOME OWNERSHIP FEELS LIKE A DREAM
So, how can young people become more engaged in politics and more likely to vote? Helping them buy their first home might resonate.
According to Ross Hickey, a Newfoundlander and senior research fellow of public policy with the University of Melbourne, home ownership is key.
“The number one predictor of voter participation is home ownership. Other things matter of course, the candidates, the platforms, the economy. But what appears to transcend these important features is home ownership, both in Canada and the US,” said Hickey.
“But home ownership appears to matter because once people own a home they have a greater stake in local politics, and therefore take a greater interest in politics in general.”
While home ownership is a good predictor of voter intention, it’s not realistic to expect the average 18-year-old to be able to afford one.
Indeed, according to a study released in June by Generation Squeeze, a non-partisan organization advocating for young adults, young people aged 25-34 likely have years ahead of them before they have enough to even consider buying their own home.
The study, called Straddling The Gap, illustrates how young people across the country are facing an uphill battle when it comes to buying a house.
It’s a problem that has been in the headlines in Toronto and Vancouver, where small properties can push seven figures, but even in cities like Halifax, young people are feeling the squeeze.
The study suggests that there is no one ‘silver bullet’ for policymakers to address this issue, instead, they’re calling for “silver buckshot” to help young people deal with rising costs and flat (or shrinking) wages.
Nationwide, average home prices would need to fall $223,000 to achieve affordability by 2030, according to the study. That’s about half the current value.
On average it takes a young person (25-24 years) 13 years to afford their own home.
Luckily in Atlantic Canada, affordability of home ownership hasn’t decoupled from average earnings, at least not yet.
Halifax, however, has started to reach that threshold, where it takes the average 25 to 34-year-old person nine years to save 20 per cent for a down payment, with home expenses not exceeding 30 per cent of income.
According to the study, average home prices in Halifax would need to fall by $68,000 for young people to save up to buy a home in five years. That’s not as severe as Toronto or Vancouver, where it could take decades, but still a troubling trend.
Alternatively, full-time wages would need to increase to $93,400 a year, growing by $13,000 on average, which is nearly double current levels.
POTENTIAL SOLUTIONS
Why does it seem that this generation of young people is being hit relatively hard? Because they are.
Four decades ago, it took the average young person about five years to save enough to afford a 20 per cent down payment on their home, according to the study. Now, it’s closer to 13.
But there are solutions out there and Generation Squeeze is recommending a few options as part of this study.
Generation Squeeze, taking its cue from the Canadian Mortgage and Housing Corporation (CMHC), is working towards widespread housing affordability by 2030.
Governments at all levels will need to work together to address this issue. Some options Generation Squeeze recommends include:
REDUCE OTHER HOUSING-SIZED COSTS FOR YOUNG CANADIANS
It’s not just the cost of home ownership that’s skyrocketing for young people — research shows that lowering the costs of child care, student debt, tuition and transit costs would also help lighten the load.
LEVEL THE PLAYING FIELD BETWEEN RENTERS AND OWNERS
Future housing planning and design will need to incorporate a larger segment of the population renting for longer periods of their lives, if not indefinitely. In other words, more apartments. Rents also have to remain aligned with local earnings.
CAPTURE WEALTH WINDFALLS
Increase taxes on capital gains and high-cost homes to even out the tax burden.
According to the study, annual revenue from municipal property taxation is down $4.4 billion (measured as a share of gross domestic product) when compared to1976, despite a $2.6 trillion increase in net wealth accumulated in principal residences over the same time. Non-taxation of capital gains from principal residences will also cost federal coffers about $6 billion in 2019. That’s a lot of money that could help young people and others who can’t afford a home.
REIMAGINE OUR ECONOMIC STRATEGY TO STIMULATE EARNINGS
Thirteen per cent of Canada’s GDP in 2019 came from real estate, rental and leasing — it’s the largest driver of the Canadian economy. This same sector only generates two per cent of employment. This imbalance needs to be evaluated.
DE-RISK THE REAL ESTATE MARKET FOR A DECLINE IN HOME PRICES
A second phase of the National Housing Strategy needs to contemplate new ways to de-risk the real estate market to bring down home costs in ways that support all Canadians.
PROTECT REGIONS WHERE AFFORDABILITY HAS NOT ALREADY BEEN LOST
In regions where affordability hasn’t skyrocketed, like Atlantic Canada, governments need to ensure these regions don’t experience the same decoupling between local earnings and home prices.