Tackling supply to ease Millennial home ownership hurdles
Finance Minister Bill Morneau may be looking to make homebuying more affordable for millennials, but a new report from RBC Economic Research reveals ownership rates among young Canadians are high compared to other countries.
The report, released Thursday, found on average more than 40 per cent of homes in Canada are owned by people who are younger than 35, which is historically higher than in many other countries, including the U.S., where 34.5 per cent of households under that age own their homes.
Calgary is the Canadian city with the highest percentage (50.6 per cent) of households under 35 that are homeowners, while Victoria has the lowest percentage (27.4 per cent), RBC said.
Previously red-hot markets like Toronto and Vancouver had some of the highest ownership rates among the major cities included in the report’s global ranking.
However, RBC acknowledges there are still affordability challenges for the millennial generation – especially in Toronto and Vancouver – and says the long-term solution is on the supply side.
“What millennials in Vancouver and Toronto really need is more inventory of homes they can afford, and a better mix of housing options — be it to own or rent,” the report read. “Solving the supply issue isn’t the federal government’s responsibility alone but requires a concerted effort across all levels of government.”
The bank is calling for a collective goal of removing regulatory barriers that make it more difficult for home developers and builders to respond quickly to the rapid demand for new housing.
David Wilkes, president and CEO of the Building Industry and Land Development Association, said there are some quick fixes that can be made on Ottawa’s part in the upcoming federal budget.
“I would put my money on some changes around amortization periods,” he said in an interview with BNN Bloomberg Thursday. “I do believe that there needs to be changes on the stress tests and have it be a fluid tool rather than a static one.”
“We’re very hopeful that we will see change to address affordability because we are hearing about it from our customers on a day-to-day basis,” Wilkes added.
RBC said these types of measures offer only short-term relief, and a more nimble supply side of the market would help address buyers’ concerns on a permanent basis.
“If Minister Morneau’s heart is set on doing something on housing in his budget next month, he would do well to focus on supply issues and let the home ownership rate fall where it may.”