Young people’s wages in Canada do not keep up with the cost of living, even when employed full-time, according to affordability studies; and the ability to pay city rents and own property becomes a “chimera” for many.
Unlike millennials who entered the market after the financial crash of 2008 and faced a lack of job opportunities, today’s younger cohort is entering an economy with a labor shortage. landmark work, making finding a job and earning paychecks a little easier.
But soaring housing prices and rents, lagging student loan repayments, and the steep rise in the cost of living have all become obstacles to living independently as a young person in Canada.
Young Canadians can’t afford housing
For Erko Abdurahman, 24, who lives with his family in Ajax, Ont., simply being able to move and pay rent in Toronto is a “chimera”. Currently employed as a full-time subway operator with the Toronto Transit Commission (TTC), he told CTVNews.ca on Tuesday that he gave up the dream of owning a home in Canada a long time ago.
“I could probably end up living on my own, but buying a place that I own and not having to pay rent? Absolutely not,” Abdurahman said.
Abdurahman says he currently owes $19,385 from his Ontario Student Assistance Program (OSAP) and estimates he will have to pay $1,000 a month for the next two years to finally be released from their debts. When factored in with his other monthly expenses (an estimated total of $882), his average monthly salary of $2,700 is not enough for the extra rent costs.
“Even though my bills aren’t as high as others, if I add rent to them, I’ll either not save anything or I won’t pay off my OSAP,” he said.
In August 2022, the average monthly rent for all property types in Canada was $1,959, an increase of 11.1% per year. The average rent has risen 1.3% per month and 16.8% since the April 2021 market low of $1,676 per month, according to Rentals.ca.
Most cities in Canada have become unaffordable for young people, with many young people between the ages of 15 and 29 losing an average of $750 when living in cities, according to the Youth Cities Real Affordability Index 2022.
Moreover, their income does not reflect the rising cost of living. According to the report, presented by RBC Future Launch in May, two-thirds of Canadian cities are still beyond the reach of young people working full-time.
“Affordability shouldn’t just be about basic survival necessities,” Youthful Cities’ Claire Patterson said in a statement.
“Affordability should also include the ability to afford the things that make a person’s life vibrant. In today’s Canadian cities, opportunities to thrive are simply not equally available to all young people.
A June report from RBC warned that housing trends have reached “the worst level of affordability since the early 1990s” and that while house prices are expected to decline in the coming months, this will not will not significantly improve accessibility.
Young people often rely on other sources such as their parents when it comes to homeownership, according to Jesse Abrams, CEO of Homewise, a Toronto-based online mortgage brokerage.
“A lot of first-time home buyers these days are getting help from mom and dad’s bank,” Abrams told CTVNews.ca on Tuesday.
“And that can happen in two different forms. One is a down payment gift, where a parent could actually help out with a down payment from their own savings and the second is co-signing a mortgage for the purchase of a home.
A report released last year by financial advisory firm IG Wealth Management found that 72% of parents surveyed were willing to help their children buy a first home, donating an average of $145,000 per child.
“We’re definitely in a home affordability crisis,” RBC economist Carrie Freestone told CTVNews.ca on Wednesday.
“Housing is the least affordable we’ve seen in decades,” she said, adding that a limited supply of housing makes home ownership even less accessible to young Canadians.
In 2022, 1.3 million people over the age of 18 — or about 4% of Canadians — said they were behind on their rent or mortgage, according to an August poll by Finder.com, a home comparison site. personal finances.
Gen Z respondents were four times more likely to consider moving for lower housing costs than Baby Boomers, at 12% versus 3%.
“Life is also getting so expensive that we could potentially chase some really high quality young talent where they just won’t be able to afford to live (here),” Abrams said.
Many young Canadians are in debt
Figures from 2019 showed nearly two million Canadian students owed the federal government a total of $20.5 billion, with the average loan balance exceeding $13,000 upon leaving school – although these figures do not include debt to other sources, such as private student loans.
Currently, the average student debt in Canada is $15,300 for college graduates and $28,000 for bachelor’s degree holders, according to Statistics Canada.
The typical repayment period for borrowers using the federal student financial aid program is nine to 15 years.
Erika Shaker of the Canadian Center for Policy Alternatives told CTVNews.ca in September that the loan forgiveness would be “absolutely transformative for students who qualify.”
Abdurahman, who graduated in 2021, says his OSAP payments have often prevented him from being able to independently invest in major expenses such as a car, rent and even extended trips.
Tuition fees have tripled in Canada due to limited government funding to universities since the 1990s, according to a 2018 RBC report. According to its research, “over 20% of graduates with bachelor’s degrees start with over 25 $000 in debt”, in 2018.
Currently, graduates can apply to delay repayment of their government student loan if their income falls below $25,000, although the Liberals campaigned last year to raise the threshold to $50,000. The Liberal government has also waived interest charges on student loans until March 2023.
Many young people reported going into debt to pay expenses, list paying bills, consolidating debt and covering living expenses after losing a job as the most common reasons, while other major expenses such as Buying a car, education and home renovations weren’t too far behind.
“We’re basically seeing a kind of huge wealth gap among millennials and other young people,” Freestone said. “Inequality is worse for millennials than for older generations, and a lot of that has to do with their level of debt.”
With files from Tom Yun from CTVNews.ca