It’s a common refrain from older Canadians: “Every generation has to work hard,” or, “You’ve got to pay your dues to get ahead,” as they admonish their kids for a failure to launch.
But research by a UBC professor says boomers should be less smug: it’s actually much harder for young people to get ahead today than it was for their parents – and that has them delaying milestones like starting a family or even getting their own place.
Young people face eye-popping house prices, pricier mortgages, and more expensive child care, says Paul Kershaw, from UBC’s School of Population and Public Health. And with lower wages, to have the same purchasing power as their parents, young people would have to work months longer each year.
“Hard work doesn’t pay off like it did in the past,” said Kershaw. “The major costs of living are skyrocketing while our income is declining. And housing is at the centre of a dramatic deterioration of the standard of living in younger Canadians.”
In Canada, average home prices in 1976 were just $206,000 in today’s dollars. Today, the average home value is twice that, at $408,000.
Lower interest rates would help affordability – but they’re not low enough today to make up the difference, Kershaw found.
Even at the high rates in the late 1970s, between 10.3 per cent and 13.4 per cent, Kershaw found that the average monthly mortgage was $1479.
At today’s rock-bottom interest rates, the average monthly mortgage on the average Canadian home is $1,785 – about $300 higher.
Wages for young people today are 9 per cent lower. That means they would have to work an extra 13 hours a month to cover this average mortgage. That adds up to another month of work each year.
In Vancouver, where average home prices have tripled since 1976 to $812,000, young people are even further behind: the average mortgage would cost $3,555 – more than twice what their parents faced.
“A typical Vancouverite would have to work five months more to pay off the average mortgage today compared to when interest rates were more than double,” Kershaw said.
Another sobering statistic Kershaw found: in 1976, it would take the average Canadian five years to save for a down payment for a home.
Today, that’s risen to 12 years. In Toronto, it’s 15 years. In B.C., 16 years, and in Vancouver, 23 years.
“I say half-jokingly, if you want to have a down payment for a house you buy as a young adult, you need to save before conception,” Kershaw said.
Behind this unfortunate trend is major demographic shifts towards cities, with a housing supply that hasn’t kept up. That has prices increasing.
The solution, says Kershaw, comes in multiple forms: allowing more dense and varied housing to ease the supply shortage, which could push prices down. Taxing wealth, rather than the property you own, so that over-leveraged young people aren’t paying the same taxes as boomers who have paid everything off.
And giving a break on child care costs is another way to help young people deal with an expense that adds up to another mortgage.
Kershaw said Canada came together to solve poverty among elderly Canadians, implementing pensions and old age security, and we now have very limited poverty for seniors.
“We solved big problems in the past. Let’s renew our enthusiasm for that now. Because housing is crushing generations from coast to coast to coast, especially in Metro Vancouver,” he said.