How Canada’s housing crisis is affecting young people

Adobe Stock: Young person getting house key

By: Craig Donaldson

Canada is in a housing crisis. No matter where you look around the country, rent prices and home prices have risen substantially over the past decade. In Canada’s largest province of Ontario, the average price of a home was $855,990 in October of 2023. Compare that to October of 2013, when the average price of a home in Ontario was $391,820. That’s a 46 per cent increase in just 10 years. Every province in the country is seeing historic highs in home prices. From Vancouver to Toronto to Halifax.

Young Canadians feeling discouraged

Those hit hardest by the housing crisis are young people. Entering the housing market is no easy task. Higher down payments and higher mortgage rate stress tests have put a strain on all Canadians, especially young ones.

Kyle Lozinski is a recent university graduate. He attended Lakehead University in Orillia, Ontario and gained a degree in computer science. He found a job right out of university working in the tech industry. Even with his decent-paying job, Kyle says it feels impossible to get ahead and save.

Kyle Lozinski working from home

“I’m not expecting our governments to wave a magic wand and just make the housing crisis disappear. But I just wish they would show us they’re making a difference. Especially when you have to be diligent with the way you’re saving and the way you’re preparing for the future in buying a house. I just wish we could be more optimistic as young Canadians for the future of the housing market.”

Kyle isn’t alone among young Canadians in how he feels. A recent poll by Abacus Data shows many young Canadians are feeling the same way. According to the poll, a staggering four in five young Canadians are concerned with housing affordability. They also found most young Canadians believe their governments haven’t done enough. With 63 per cent saying the federal and provincial governments aren't addressing the issue of housing well enough.

Young Canadians who are currently paying a mortgage or rent are also feeling the pinch. With 89 per cent saying they’ve experienced concerns about paying their mortgage/rent over the last few months.

“I’m not a special case here, my situation is near exact to what many young Canadian are experiencing.” 

Kyle's message is simple. He wants all young Canadians to get involved civically and vote to voice their opinion.

"I think the best thing young Canadians such as myself can do to be heard is vote, the government's actions are crucial in controlling the housing crisis and potentially even remedying it.”


Higher interest rates and low absorption rates

Interest rates are affecting the housing crisis. Since April 2022, and the offset of the COVID-19 pandemic, the Bank of Canada has raised interest rates to combat inflation. Interest rates were at a historic low of 0.25 per cent in 2022 and have risen since to five per cent, the highest since April 2001. A decade ago, rates were at one per cent. High inflation is a barrier for young people trying to enter the housing market. The higher the cost of food and regular goods and services, the harder it is to save for all Canadians.

Interest rates affect everyone. The current rate at five per cent is affecting Canadian's mortgage rates and debt levels, as well as developers trying to build homes. The Bank of Canada says the higher interest rates are working as they’re discouraging borrowing and lowering demand for housing and goods and services, allowing the economy to catch up.

“Monetary policy doesn’t work as quickly or painlessly as everyone would like, but it works. And it will be worth it when Canadians can once again count on low, stable and predictable inflation,” said Bank of Canada Governor Tiff Macklem at a speech in Quebec in February.

Real Estate Broker Jason Ruttan

Real estate markets outside of the GTA are seeing markets that are favouring buyers right now. In the Georgian Bay area, real estate broker Jason Ruttan is seeing lower absorption rates. This simply means people aren't buying as many homes. In Wasaga Beach, the rate is at 15 per cent. When the absorption rate in a market is less than 20 per cent, it's considered it a "buyer's market". When the absorption rate is higher than 20 per cent it indicates a "seller's market". Low absorption rates and a "buyer's market" have caused house prices to come down a few per cent in Georgian Bay, but not to levels that would solve affordability. He says interest rates are a factor playing into things, but that high interest rates aren't anything new.

"The interest rates have affected the number of buyers in the marketplace right now, understandably many have left, not because the interest rates are high, historically they're still low," Ruttan said. "They're just higher than they were and that difference has made a big difference in what they qualify for, not only in the value of a home they can purchase but just what that monthly payment means."

Solving affordability is complicated

The CMHC says Canada needs to build 5.8 million new housing units by 2030 to keep up with supply and fix affordability.  Right now Canada is on track to build about 2.3 million new housing units by 2030. Leaving a gap of 3.5 million housing units that need to be built by the end of the decade. Canada’s population is growing rapidly and to keep up with demand for housing the CMHC says Canada needs to increase home building. Compared to this time last year, home starts are down in some provinces in Canada, or the same.

Mitchell Bjorn, a political science graduate from Lakehead University, says getting more homes built is a complicated task.

“The topic of the housing market in Canada is an extremely complex one due to the numerous different factors that have played into it, such as policies at every level of government, but the fact is Canada has not been building enough houses to keep up with the demand for decades, and currently affordability is an issue that doesn't have one simple solution," Bjorn said.

Adobe Stock: House for sale

Real estate broker Jason Ruttan isn't sure just building homes will necessarily solve the affordability issue, at least not in Georgian Bay.

"85 per cent of sellers last month did not successfully complete a sale to a buyer. I don't think inventory is necessarily an issue, at least not in our local market, so if it's not inventory, then why are so many sellers having difficulty selling their homes? So of course we look at affordability."

Building homes is political

The federal Liberal government led by Prime Minister Justin Trudeau has been under tough scrutiny by opposition parties to do more to get homes built and solve supply and affordability.

Trudeau in September announced the removal of the GST on rental builds to help ease the pressure on developers and entice them to build more affordable housing. The federal Liberal government is also pushing the Housing Accelerator Fund, which they created, as a way to take action on supply and affordability.

"The Housing Accelerator Fund provides incentive funding to local governments encouraging initiatives aimed at increasing housing supply. It also supports the development of complete, low-carbon and climate-resilient communities that are affordable, inclusive, equitable and diverse," the CMHC says on the fund's page, which was open for municipalities across the country to apply to for funding.

Trudeau recently made an announcement in Quebec committing funds to help build more housing units through the Housing Accelerator Fund.

"We've heard Canadians and we're working hard to build more housing, faster," Trudeau said. "Together with our provincial and municipal partners, we will continue to cut red tape and build the safe, affordable communities that Canadians need and deserve, from coast to coast to coast.”

Adobe Stock: Parliament Hill, Ottawa

Conservative Leader Pierre Poilievre has criticized Trudeau’s plan for not making any progress.

“The evidence is that this fund is not building any new homes because housing starts are actually down since the program came into place. What’s happening is the money is going to build more bureaucracy, we don’t need more bureaucracy,” Polievere stated at a press conference where he was calling on the government to support his housing plan.

Poilievre is proposing his plan which is the Build Homes Not Bureaucracy Act. Poilievre’s plan would reward municipalities that increase home building with more funding and cut funding to municipalities that don't increase home building.

NDP leader Jagmeet Singh is pushing the federal Liberal government, with whom his party has a supply and confidence agreement, to build affordable housing units on federal land.

"The federal government has the resources, the land and the power to build more affordable housing units in cities across the country. They just need the will to do it,” Singh said while advocating for housing in Halifax.

For young Canadians looking to see the housing affordability issue solved sooner rather than later, it seems the issue will linger until the next federal election in 2025, and potentially even into the 2030s.


Be the first to comment

Leave a Reply

Your email address will not be published.