The Vanishing Starter Home: Why Canada’s Housing Dream is Slipping Away
For young families across Canada, the dream of homeownership feels increasingly out of reach. A new report from the University of Ottawa’s Missing Middle Initiative (MMI) paints a stark picture: the affordability gap between incomes and starter home prices has widened dramatically, surpassing even the challenges faced in previously expensive markets like Vancouver, Victoria, and Toronto two decades ago.
The Income-Price Disconnect
Since 2004, average dual incomes for households aged 25 to 34 have risen by 76 per cent. However, the average price of a newly-built starter home across 23 metropolitan areas has skyrocketed by a staggering 265 per cent. This disparity means that even with increased earnings, prospective homebuyers are falling further behind.
The situation is particularly acute in certain cities. Today, eight Canadian cities have a higher price-to-median income ratio than Vancouver did in 2004 – when Vancouver was considered the most expensive city in the country.
A Generational Shift in Affordability
The MMI report highlights a significant shift in affordability over the past two decades. In 2004, starter homes in most Canadian cities were priced at around four times the median dual-earner income. For example, in Kingston, Ontario, a starter home cost approximately $185,000, just 3.1 times the median income of $59,200. Vancouver, already expensive, saw starter homes at 6.8 times the median income.
Fast forward to today, and the landscape has drastically changed. In Kingston, the same starter home now costs around $740,000 – nearly 6.9 times the current median income of $107,480. Sherbrooke, Quebec, has seen a similar trend, with prices rising from 1.8 times the median income to 3.3 times. Vancouver now sits at a daunting 17.2 times the median income.
Beyond the Pandemic: A Long-Term Trend
The affordability crisis isn’t simply a result of pandemic-era inflation. The report notes that the price-to-income ratio in London, Ontario, more than doubled between 2004 and 2019, demonstrating a pre-existing trend.
The Root of the Problem: Supply and Building Costs
The MMI report suggests that simply waiting for prices to fall won’t solve the problem. The core issue lies in the escalating cost of building new homes. Without addressing land-use regulations, development charges, and construction standards, the gap between incomes and home prices is likely to persist.
The report underscores that the middle class may be unable to afford a family-sized starter home unless policymakers take decisive action to reduce the cost of homebuilding. If building costs remained constant, it would take approximately 25 years for incomes to catch up to 2004 affordability levels.
What Can Be Done?
Governments at all levels are exploring solutions, including increasing housing supply and reducing red tape. However, economists caution that current prices remain too high for buyers and not high enough to incentivize sufficient new construction.
Did you know?
Canada’s largest provinces are scoring the worst on housing policies and outcomes, according to recent reports.
FAQ: Canada’s Housing Affordability Crisis
Q: What is the price-to-income ratio?
A: It’s a measure of how many years of income are needed to purchase a home. A higher ratio indicates lower affordability.
Q: Is the housing crisis limited to specific cities?
A: No, the MMI report shows affordability challenges are widespread across Canada, impacting both large metropolitan areas and smaller cities.
Q: What factors contribute to high building costs?
A: Land-use regulations, development charges, and construction standards all play a role in increasing the cost of building new homes.
Pro Tip:
Stay informed about local housing initiatives and advocate for policies that promote affordability in your community.
As the Canadian housing market continues to evolve, addressing the fundamental issue of building costs will be crucial to restoring the dream of homeownership for future generations.
Explore further: Read the full Missing Middle Initiative report.
