Without a blistering correction in the real estate market, a growing number of people will never own a house.
Expect them to be angry about it. In fact, anger among young adults about the declining affordability of owning a home is already building.
“We’re heading into a pretty scary moment that is generationally driven,” David Coletto, chief executive officer of the polling company Abacus Data, said in a recent interview. “There’s a broad concern about the cost of living and being able to live the kind of life that people expect they should be able to live. In the surveys I’ve done, 80 per cent of Canadians think every person should have the opportunity to own a home.”
Rising costs are taking over as a top source of stress and anger as the pandemic eases, and no cost is rising as fast as housing. In February, the national average resale price was up 20.6 per cent from the same month of 2021, to $816,720.
Housing affordability is a generational conflict – Gen Z and millennials who find houses unaffordable versus older generations who already own and benefit when prices rise. It’s also class-driven – young adults on their own versus well-off families helping their adult kids buy homes they could not otherwise not afford. And it’s regional – buyers from expensive cities have migrated to cheaper, smaller locales.
Politicians have done little to fix the problem of housing affordability. Might someone instead exploit this issue to win the support of those shut out of the market?
Largely because of the pandemic’s economic ripples, the already strong Canadian housing market went supernova in the past 18 months. The cost of mortgage borrowing plunged, governments pumped financial support into the economy and many people were left with both the means to buy a home and a heightened desire to move somewhere more spacious and more lockdown-friendly.
There’s plenty of blame to spread around for the growing affordability problem. The federal government has been too passive in managing the housing market, too many real estate speculators are shoving traditional buyers aside and, arguably, interest rates have been kept too low for too long. Also, we should probably have built more houses.
The rise in house prices has massively exceeded growth in incomes, which means affordability is fading quickly for buyers who do not work in high-paying professions or have well-off parents. Mr. Coletto recalls polling people a few years ago on housing and getting a sense they understood home ownership was expensive and would require them to work hard to achieve it. Now, the mood about the prospects of owning a home is darkening.
“It’s becoming, ‘Look, I’ve done everything I can, and I still feel nowhere closer to being able to afford it,’” Mr. Coletto said.
There are already signs of affordability being weaponized as a political issue. Pierre Poilievre, a top contender for the leadership of the federal Conservatives, has been talking about young people being priced out of the housing market by inflation resulting from the federal government’s economic policies.
“We are creating a permanent division in our society between the aristocracy who owns and everyone else who must rent, forever, and whose hard work and wages will forever go to paying the mortgages of those who own and rent to them,” he said at a news conference in early January.
Mr. Poilievre was a supporter of the truckers protests that took place in Ottawa’s downtown for three weeks earlier this year. His talk about housing suggests a similar attempt to ride a populist wave of resentment. It might just work.
“When people no longer believe they can do the thing they always thought they could, that creates a void for someone to fill,” Mr. Coletto said.
We shouldn’t rule out the possibility that rising interest rates will quell inflation and soaring house prices. The Bank of Canada increased its trendsetting overnight rate earlier this month and is expected to do likewise several more times this year. The whole point of this exercise is to get individuals and business to spend less.
But money is being made in housing at rates we may never see again in our lifetimes. People are getting angry about being cut out of this jackpot, and politicians have so far been ineffectual.
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