Desperate wannabe homeowners, meet Megan Young.
Unlike many of her peers, she believes the answer to expensive house prices is not to make compromises on what and where to buy. This 32-year-old IT consultant in Toronto is a committed renter.
Ms. Young lives in Toronto's lively Annex neighbourhood in a two-level, two-bedroom apartment in a house that costs $1,830 a month. "It's exactly what I want," she said. "I love walking along the tree-lined streets, I love my massive deck, I'm a 10-minute walk from four subway stations."
Personal finance orthodoxy says that renting is throwing your money away and that buying means building equity in an investment that will rise in value over time. This is the weakest of oversimplifications, but let's say you believe it. How can you reconcile the financial benefits of ownership with the fact that housing is so overheated in some spots that the chief executive officers of two banks last week called for the government to cool things down?
On Saturday, we ran stories about how millennials are responding to high urban house prices by moving to the suburbs. Click here and here to read them. Ms. Young lives in a downtown neighbourhood she couldn't afford to buy in, with money left over for travel, checking out Toronto's restaurant scene and hobbies such as scuba diving.
Travel's big with her. Her goal is to save $2,400 a year for this purpose and then top up her savings as required for specific trips. She has recently spent time in New York and London, and is planning something bigger over the next year. "I'm looking at doing either a scuba diving trip or a small group trip to an offbeat destination – parts of Eastern Europe or South America, Northern Africa. Travel's a very important part of who I am in my life. I'm not willing to compromise that for a [house]."
Renting allows Ms. Young to afford other things besides the classic millennial lifestyle. Even while pounding down her student loan, she's saving and investing in both a tax-free savings account and a registered retirement savings plan. She'll have the debt paid in full in November and plans to substantially increase her retirement savings.
The mobility that comes from renting has been a career booster for Ms. Young. She's lived in Ottawa, Calgary and Toronto, and moving was never complicated by having to sell a house.
While working in Calgary several years ago, she found the rental market to be unfriendly to tenants and considered advice from a colleague to buy a home. "I ran the math and decided I couldn't imagine extending myself like that [financially]," she said. "Also, I would have been stuck in Calgary. I would have been committed to the city if I'd done that."
An important aspect of Gen Y personal finance is uncertainty – plans can quickly change as a result of events such as getting married or having kids. Let's call Ms. Young a near- to medium-term renter, at least. Buying is something she plans to look at when she's met one these two financial goals – having $250,000 in retirement savings or having an annual income of $250,000.
Such ambitious plans. Might she not stumble along the way? Ms. Young points out that, as a renter, she has the advantage of having predictable living costs every month. There are no homeowner emergencies to drain her cash.
One of the drivers of millennial home buying right now is the fear of missing out. There's a sense, and it's quite justified, that current price trends in some cities will make ownership impossible in the future. Ms. Young says she's not worried about missing out, in part because she thinks housing prices could fall at some point. But she's also a contented renter who is in no rush to take on the costs and responsibilities of ownership.
"I'm not staying up at night worrying that I'm missing out on buying a house," she said. "There are people in New York City – and Toronto seems eager to compare itself to New York, I notice – who rent, and they rent there happily for their entire life."
Desperate Gen Y home buyers, consider the rental lifestyle before you settle for that tiny condo or the house in the distant suburbs. Renting's less of a compromise than you might think.
This story is part of our enhanced Generation Y coverage, designed to help millennials navigate their finances. This tool can help you decide where you can afford to rent while this one can help you figure out if you can afford to move out. Follow the discussion on social media by looking for #genYmoney. You can also join The Globe and Mail's Gen Y Money community on Facebook.