Quarter of Canadians spend more on housing than they can afford
Posted on Sep 30, 2013 in Mortgage Market Updates and NewsFiona Buchanan, Postmedia News
OTTAWA — Joelle Gibson, 24, and her husband Stephen, 25, had to make sacrifices to find a rental property that suited their needs, including giving up their car, selling off some household items and cutting costs wherever they could.
Living in a two-bedroom townhouse in Ottawa with their 16-month-old son, Jesse, the Gibsons put 36% of their total household income toward their rent and utilities.
It’s an amount that puts Joelle, 24, and Stephen, 25, among a large group of young Canadians, according to newly released data from Statistics Canada.
New data from the 2011 National Household Survey revealed that 49.7% of households ages 24 and under spend over the affordability threshold — defined as 30% of total household income — on shelter costs including rent or mortgage payments, property taxes, condo fees and utilities. Overall, 25.2% of Canadian households exceed the threshold, which was set by the Canadian Mortgage and Housing Corporation (CMHC) in 1986.
We know people our age who want to start families but are too worried about the cost
Dallas Alderson, the director of policy and programs with Canadian Housing and Renewal Association, said it can be a financial struggle for households that commit more than 30% of their income to housing costs.
“When you pay too much, you’re not able to buy groceries, you are not able to put your kid in a recreation program and those are really critical, basic things.”
Housing affordability hits young people the hardest compared to other age groups; for 25 to 44 year olds, only 26.7% are spending above the 30% threshold. The number dips to just 21.9% for 45-64 year olds, and among those over 65 years old, 23% of households dedicate more than 30% of their total income on their housing costs.
Households that exceeded the affordability threshold paid an average shelter cost of $1259 per month on household costs, $510 above the 30% indicator.
Joelle, a part-time sales consultant who works from home and is Jesse’s primary caregiver, says her young family is just one of many forced to make difficult choices when it comes to affordability.
“We know people our age who want to start families but are too worried about the cost,” she said.
Stephen, who was recently laid off from his full-time job that moved the family from Toronto to Ottawa in July, is now a freelancer for digital media companies. Initially, he and Joelle decided to rent a dwelling close to Stephen’s work and live just outside of Ottawa’s downtown core.
“I did look at places outside (the city centre) and they are definitely cheaper, but then you need a car, so it’s more expensive,” said Stephen.
The Gibson’s rusted, grey sedan sits in their driveway with two flat tires — they can’t afford to insure the car. And it¹s not just the vehicle that had to go. The Gibsons have had to sell numerous “luxury” items including a tablet to cut down costs.
They have also been forced to skip recreational activities for their son.
“If I want to take a swim class with Jesse, that’s extra money per month that we can’t afford,” Joelle said.
Across Canada, 3.3 million Canadian households — or 25.2% — spent 30% or more of their total income on housing costs in 2011, up slightly from three million households in 2006.
Renters were more likely than homeowners to exceed the affordability threshold — 40.1% of renting households dedicated 30% or more of their income to shelter — but 18.5% of homeowners also spent over the 30% mark on housing.
Homeowners with a mortgage also tended to exceed their affordability thresholds by much more than other households: on average, owners with a mortgage blew past the threshold by $688 per month, owners without a mortgage exceeded the mark by $259, and renters by $403 a month.
Roger Lewis, a senior researcher with the CMHC said that some households, particularly owners, may exceed the affordability threshold voluntarily.
“They might be in a larger house than they need or be accelerating their mortgage payments or something else,” he said.
Lewis added that it is also important to look at the number of people living in a dwelling compared to the size of the home as well as the living conditions of the shelter to determine the number of Canadian households experiencing housing affordability problems.