Wednesday, January 10, 2018

Home Ownership in Toronto Out of Reach for Common Man

The Average Citizen

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, …” 

Charles Dickens, opening sentence,
A Tale of Two Cities (1859)

For some fortunate few, it is the best of times; for most others, it is not. Family homes are so costly in Toronto that these forever remain out of reach for most everyone except for the most wealthy residents. In this city, for example, the common man will find out that single-family homes are highly unattainable, especially when you consider that home prices average almost a million dollars (and that just for a simple three-bedroom bungalow)—this is more than 11 times the total annual median family income in Toronto ($86,260; 2015 census).

When you consider that banks and mortgage lenders still tend to view the maximum cost one should spend on a house as three times total annual family income, one wonders who is buying all these million-dollar homes that require a total income of at least $250,000—this is three times the median annual income in Toronto. Certainly not the average Jill or Joe; that’s for sure. (For a humorous but tragic take on home ownership, there is a scene in Charlie Chaplin’s Modern Times.)

This is not a good situation for anyone who wants to own a home. Is it going to change? I think so, but it might be too little too late. Let’s examine some scenarios. One scenario is that when a vast majority of aging baby boomers begin selling their homes, either to downsize or to go to retirement communities or to move near their children and grandchildren or to move to warmer climates, it will cause a glut of homes on the market. Then, the economic laws of supply and demand take over, and housing prices will drop, possibly to where they would have been had the market followed a normal trend of inflation.

Even so, this might be in another 10 years. No one can know for sure. Another scenario is that it can also happen this year. but for completely different economic factors. Trends suggest that house prices rise for a certain period, say 10 years, and then they drop, a sort of  housing market correction. Or the housing bubble bursts, as it did in the U.S. in 2006–8. Analysts say that such a correction is now due. It is not a matter of if but when. Or, perhaps the foreign investors (mainly from China) will find another city to park their money, seeing Toronto as less attractive, with too much government oversight into their financial activities.

The only people who would be upset upset about any of these scenarios are speculators and house-flippers as well as real-agent agents, mortgage companies and banks. And lawyers, title attorneys and notaries and builders and assorted financiers and various levels of government. There are a lot of people who keep this thing going, have their finger in the pie, and who make a good living from its continued success. It might also be the same people who contribute to its downfall. It’s real-estate monopoly but with real money.

Even so, it might be for naught. It might already be too late. All of these scenarios make an implicit promise that more families of my children’s generation will be able to buy homes, but unless it drops in half—an unrealistic scenario—a very large number of families will still not be able to buy a home here in Toronto. For those making minimum wage or slightly above it, or even two wage earners each making $25/hour (approx $50,000 a year), a house will forever be out of their reach.

Some realists will say that not everyone need own a home, and while this is true, a fair and just society says that an average middle-class family should have an opportunity to buy a house if they scrimp and save and work hard enough.

Yet, no amount of saving and self-denial will work in Toronto for the average Jill or Joe. The dream of home ownership with a lawn in front and a backyard for barbecues and a deck, and where kids might run about, will now always remain a dream. (“Say it ain’t so, Joe.”) Yeah, this is really the case for Toronto (and Vancouver), both anomalies, but not for many cities in Canada and the United States where home ownership is still possible, at least more so than in Toronto. This includes my native city of Montreal.