The percentage of Toronto-area homes owned by seniors is rising, putting more pressure on an already tight real estate market.
A recent report from Canada Mortgage and Housing Corp. (CMHC) says that rising homeownership rates among seniors in the Toronto area is making it tougher for younger generations to get into the market.
Author Inna Breidburg says that as Toronto’s senior population grows at a faster pace during the next decade, “the conventional view is that this demographic shift will likely help to increase the supply of housing to younger homeowners, since seniors typically downsize or leave homeownership.”
But she says baby boomers are working longer than previously and have more wealth, as well as community supports that will allow older seniors to stay in their homes longer. “Thus, over the next decade, seniors might not be freeing up the expected number of dwellings for younger households thus limiting supply. Furthermore, the share of seniors preferring to rent ground-oriented homes may increase further, thus contributing to tighter market conditions in this housing segment,” says Breidburg.
In 2016, when the most recent census was conducted, seniors represented 14 per cent of the Toronto population, up from 11.3 per cent in 2006. That percentage is expected to grow to 18.2 per cent by 2026.
Seniors owned 25 per cent of the homes in the Toronto area in 2016, up from 20.4 per cent a decade earlier. The homeownership rate among seniors was 75.1 per cent in 2016, up from 73.4 per cent in 2016.
Breidburg’s report prompted a reaction from people who felt she was blaming boomers for the struggles that young people, particularly millennials, are facing in the real estate market.
A popular millennial internet meme says, “If I had a dollar for every time a baby boomer complained about my generation, I’d have enough money to buy a house in the market they ruined.”
A recent report by the Real Estate Intelligence Network (REIN) says millennials are the largest demographic in Canada, “which means their preferences will impact housing trends for years to come.”
The report says so far, the Prairie provinces are the only place where there are more millennial homeowners than baby boomer owners.
The report authors couldn’t resist adding a few jokes (“Look at that millennial, walking around like he rents the place.”), but it says real estate investors must learn how to cater to this growing demographic. The homeownership rate for millennials in the GTA is expected to rise from 40 per cent in 2016 to 60 per cent in 2026.
“We know that millennials want to purchase a home, but that means getting rid of student debt, having stable employment that pays well and saving for a down payment,” says REIN. “This cohort is living at home longer, delaying marriage and having children, and delaying their own home purchase. Millennials are more likely to purchase a condo or townhome in an urban centre with good transit and amenities that supports their individual lifestyle experience. At the end of the day, though, millennials are primarily renting, which is great news if you have a rental property.”
The report says as of June 2018, 35 per cent of Canadian millennials were living at home. The increase in the number of intergenerational homes shows that rather than hurting millennials’ real estate prospects, many baby boomers are helping them by allowing them to save money while living at home. It’s a win-win. Seniors get to stay in their homes longer with live-in support, while young people have time to build a nest egg.
This is also part of the reason why seniors are taking on more mortgage debt than they did a decade ago. The CMHC report says 26 per cent of all senior homeowner households in Toronto had a mortgage in 2016, up from 20.5 per cent in 2006.
“The known reasons for having a mortgage at an older age was financing in-place retirement, renovations, investments, as well as helping other family members,” says Breidburg.
The REIN report says millennials are “not necessarily looking for the same housing solutions as their parents or grandparents – i.e. not the ranch bungalow in the suburbs.”
The report says the average age of a first-time mother has been steadily increasing since the 1970s and is over 30 in many parts of the country. “On average, it is only the first wave of millennials that has started to have children in the last few years. For a real estate investor, this translates into millennials not yet desiring a three- or four-bedroom house in the suburbs, instead preferring condo living in the urban centres.”
However, a shift may be in the works as affordable real estate becomes harder to find in the cities. “The number of millennials moving out of Toronto and Vancouver for less expensive areas of their province is trending upward,” says the report. “Family is important to this generation, despite their delay in marriage or having children, so theoretically, eventually millennials may shift to suburban living, or at minimum, larger dwellings with multiple bedrooms, in greater numbers.”
Breidburg’s report says among renters, the income of seniors was less than younger generations.
“Historically, across all age groups, homeowner households tend to have higher incomes compared to renters,” she says. “However, over the past years more young professionals with high earnings have been renting in Toronto, thus contributing to a decrease in the income gap between renters and homeowners in the younger cohorts. For seniors though, the income difference between renters and homeowners widened further.”