Policies should help realize goal of buying a home

From running jokes on forever living in their parents' basements, to not being able to hold down a real job, it is now beyond cliche to poke fun at millennials and home ownership.

But belittling millennials for not being able to buy homes at the same rates as their parents glosses over the very real systemic issues preventing them from doing so.

For many millennials, it is difficult to buy a home due to myriad reasons: precarious work contracts and underemployment, annual incomes not rising with the rate of inflation, not having family support or generational wealth to assist with the cost, carrying higher student loans for longer periods of time and not being able to save for the necessary down payments.

And with a housing market that seems to exponentially increase in price every time you blink (OK, perhaps not every blink — maybe just the second and third), the down payment goalposts move further away each year.

Ask anyone — millennial or not — looking to buy a home right now. The housing market is hot and somewhat unpredictable (not unlike early 2000s pop stars many millennials grew up with).

The Canadian Real Estate Association notes the price of a home in Windsor-essex was $337,679 in October 2019. A year later, it jumped to $422,723 — even in the midst of a pandemic. That is a 25.2 per cent increase with no indication of cooling off.

In London and St. Thomas, there was a 20.6 per cent increase over the same time period from $384,300 to $463,300.

At the same time, incomes aren't rising at the same rates. Most of us didn't see a 25 per cent raise in our salaries over the past year (don't we all wish). This leaves many young people saddled with more expenses and debt than previous generations.

A report from KPMG found the debt-to-income ratio for millennials was as high as 216 per cent, while it was only 125 per cent for Generation Xers when they were the same age. Meanwhile, for Baby Boomers at the same age: the debt-to-income ratio was a paltry 80 per cent.

What does this mean for home buying? A report by Generation Squeeze, an advocacy group for young Canadians, found millennials need an average of 13 years to save for a 20 per cent down payment compared to five years for their parents in 1976.

That has pushed their ability to buy a home without becoming “house poor” further down the road — not to mention potentially negatively impacting retirement savings.

Relatedly, a 2019 BMO report found the average age for a first-time homebuyer was 36 years old — the older end of the millennial cohort.

Are we perhaps obsessed with home ownership? Maybe.

And perhaps in a region with some of the most affordable rents in the country (actual rental supply, notwithstanding), it may be

OK to keep renting, especially if the numbers favour rental expenses over all the combined home ownership cost.

But home ownership can also act as a safety net of sorts, allowing folks to accumulate wealth in the form of home equity that can be passed down over generations and act as a social equalizer, moving people from one income bracket to another.

Other countries have figured out how to transfer housing wealth across generations.

Singapore boasts one of the highest home ownership rates in the world with 80 per cent of its population living in government-built flats. Their Housing Development Board builds, owns and manages the supply, allowing people to buy and sell 99-year leases.

The government also helps young families buy their first homes with subsidies. And it has carefully thought-out social policy associated with the developments on density, amenities such as parks, transit and racial diversity throughout the area.

On this side of the world, government subsidized housing is often associated with disrepair. Not in Singapore. The country understood these homes directly impact prosperity for its population, so it carefully manages the housing.

Government management of new housing may not benefit millennials the most, but it could be a tool for following generations — especially if we want to keep the dream of home ownership alive.