How Toronto’s housing costs are hampering the city’s ability to attract talent
The cost of home ownership and rent is impeding young professionals' ability to save and pay down debt.
TheStar.com
Nov. 1, 2017
Tess Kalinowski
They are the young professionals the Toronto region covets — highly educated and already earning good incomes in their 20s and 30s.
They are also the canaries in the coal mine when it comes to the region's challenging housing market. If they can't afford to live here, who can?
New research from the Toronto Region Board of Trade shows the high cost of housing may be crushing the financial goals of high-achieving millennials.
A survey for the business group shows 83 per cent of young professionals believe high rents and home prices are impeding their ability to save for retirement.
Sixty-five per cent say their shelter costs are preventing them from paying down debts.
The findings come a week after new census data highlighted the Toronto region as the country's least affordable housing market, trailing even Vancouver.
Young professionals are increasingly discouraged by the state and the cost of housing, said Board of Trade CEO Jan De Silva. She said that concerns from the business community about talent retention and the supply of appropriate housing for workers — rental as well as ownership housing — prompted the board to survey young professionals.
It's not a crisis yet. But it's an issue that demands attention if Toronto is to continue attracting and retaining global employers.
De Silva says millennial workers are wondering how they will ever get ahead.
"We've all grown up in a generation that says housing ownership is a good thing, it's how you create a financial future for yourself. What we're hearing from our young professionals is, that whole cost of getting into the housing market just feels really far beyond reach," she said.
"Those who are getting in are saying, 'It's just consuming so much of our available income that even trying to think about retirement savings, which is also a very responsible part of financial planning, is being impacted by this."
The young professionals in the survey said they planned to buy a house with a 20 per cent down payment. But, on average, they had saved only 14 per cent.
Fifty-two per cent of those who rented said that being unable to afford a down payment was the main reason they couldn't afford to buy.
Among the 803 survey respondents, aged 18 to 39, 42 per cent owned homes and 58 per cent were renting. Thirty-nine per cent of the homeowners lived in detached houses; 34 per cent in condos and 27 per cent lived in semi-detached or town homes.
Among the renters, 41 per cent lived in high-rise condos; 24 per cent in mid-rise buildings and 31 per cent lived in a detached, semi-detached or town houses.
A third of those surveyed said they expect help from family or friends to buy a home, with younger respondents, 18 to 29, most likely to look for that kind of assistance to buy a condo.
Sixty-seven per cent of those still renting said they expect to pay less than $750,000 for a home.
The average price of a re-sale home in the Toronto region in August was about $732,000. In September, it was $775,546, according to the Toronto Real Estate Board. The average price of a newly constructed condo was $661,188 and a new-build, detached house in the Toronto region cost $1.6 million on average last month, said the Building and Land Development Association.
The region needs to do a more robust job of collecting housing data, said De Silva. The glut of one-bedroom-plus-den condos that don't accommodate families will eventually drive millennials farther afield.
The challenge is not a foreign buyers issue, it's a supply issue, she said.
"There's a lot of international talent that's choosing to live in Toronto and we want them to be part of this community. So the (Ontario) foreign buyers’ tax was just the wrong approach and there was no data to support it," she said.
The Board of Trade study included responses from among its own 1,100 young professional members, CivicAction's Emerging Leaders' Network, the Toronto Youth Cabinet and the Toronto Public Library's New Collection. The email survey by Environics took place between June and August.
Chasing the Dream
Condo shopper Seema Akram, 27, works as an assurance manager for a public accounting firm downtown. She views her future apartment as a home and an investment — one for which she has sacrificed.
Akram lived with her parents while studying at York University and, except for a brief stint working abroad, she has remained in their Markham house commuting three hours, round-trip each day to work downtown.
"When I first graduated and started to work full-time I just didn't have the money (to move out)," she said.
Now she's paid off the car she uses for client visits and she's saved a 20 per cent down payment for a condo. Her budget is $580,000 — max. The average price of a re-sale condo in the City of Toronto last month was $554,069, according to the Toronto Real Estate Board.
But all that planning and saving hasn't made house hunting easy.
"I've felt for the last two years I've been trying to chase (the market)," said Akram.
"I feel like I do have enough money to pay a sizeable down payment and get what I want. It's just the real estate market is a bit of a game with the bidding wars and so forth," she said.
"I sometimes wish that the seller would just say, 'Here's what I want, give it to me or keeping looking,'" said Akram.
She expects to spend 40 per cent of her monthly income on housing.
"It will be a little bit of a stretch but still comfortable," she said.
In exchange, Akram thinks her wish list is pretty reasonable. She wants a bedroom separated from the living room by a real door, parking and a kitchen with counter space — an island or something more than a wall of cupboards and appliances at one end of the unit's living space.
She doesn't need a balcony or a view. "I just need sunlight and I'd be happy," she said.
Akram briefly considered buying farther outside the city, but reducing her commute is a key reason for the move.
Friends who have bought homes have done it with the help of their families, she said.
"Back in the day (our parents) were able to afford a house at our age or before they turned 27 and it didn't put so much of a dent in their financial situation as it would for people today. We recognize the cost of housing has increased and it hasn't increased in proportion with people's salaries," she said.
Still, Akram likes cities. Outside of Toronto, she says she would only ever consider living in Montreal and Vancouver in Canada. She expects to stay in the city, even when, one day, she looks at moving up to a house and yard.
Who are the young professionals surveyed?
- 57% Females
- 90% Working full-time
- 44% Hold graduate degrees
- 31% Have a household income of $60,000 to $100,000
- 40% Have a household income of at least $100,000, including 21% who have incomes over $150,000
- 35% were aged 30 to 34
- 32% were between 25 and 29
- 25% were 35 to 39 and 8% were 18 to 24
- 64% were part of a 1- or 2-person household
- 36% had 3 or more people in the household
- 51% lived in the City of Toronto; the remainder lived in the surrounding 905-area communities, including Hamilton
- 83% had no children at home
- 32% planned to have children in the next 2to 3 years
- 43% expect to have children eventually
Source: Environics for the Toronto Region Board of Trade
