Skyrocketing housing prices in Vancouver and other cities in Western Canada hint at grave implications for a new generation of Millennial homebuyers. Despite BC’s booming job market, the high cost of real estate is forcing younger purchasers to postpone starting a family, and is even forcing them out of the city where they grew up.
The high cost of real estate has dominated the news in Vancouver for the past six months. After stories of offshore investors and “ghost neighbourhoods,” the Vancouver and BC governments floated the idea imposing a tax on foreign investment.
And then at the end of January Vancouver was ranked the “third least-affordable housing market in the world” by Demographia in its annual survey (pdf).
In fact, in terms of affordability Vancouver ranks worse than even New York or Boston. In the 12 years that Demographia has been doing the study, Vancouver’s multiple has jumped from 5.3 to the current 10.8. Demogra phia came up with this multiple by dividing the median $756,200 median-priced house by Vancouver’s median household income of $69,700.
What’s your story with real estate in Vancouver? Let us know in the comments.
Other commentators say the disparity between household income and housing prices is even worse.
According to the Real Estate Board of Greater Vancouver (REBGV), house prices in Greater Vancouver have increased 20.1% in the last year. And BC Stats reports that meanwhile average earnings have only increased by 3.8%.
If these numbers are accurate, one Vancouver blogger argued in November 2015, then the median multiple for Vancouver is now 12.3 — higher than any US market at the peak of their bubble.
Vancouver Housing Market Puts Strain on Local Families
Where does this leave the typical family in Vancouver?
Current homeowners have often helped their children with university or college tuition. Many Boomers are also spending time and often money looking after an ageing parent.
On top of that, while homeowners may be paper millionaires thanks to the meteoric rise of Vancouver’s real estate prices, they often cannot access that equity unless they sell their house.
This leaves their Gen-Y children in a bind.
“Millennials will be the first generation that is not going to be better off than their parents were,” said Melanie Reuter, director of research for the Real Estate Investment Network, in a 2014 interview with the Globe and Mail.
Millennials are being forced to leave Vancouver and the ones who remain are putting off having children — “no one wants to raise a child on the tenth floor of a condominium.”
Even so, Vancouver is not an especially dense city. About half of the city is still zoned single-family residential. That is a large percentage for a major metropolitan area, said Vancouver Sun columnist Pete McMartin a year ago. The lack of density, he says, serves to keep prices high.
So, while Vancouver is often touted as a green city, the city may never achieve the density needed to bring down housing costs.
Millennials will continue their exodus out of the city.
Luckily, for innovative families, there are some ways to deal with this crisis of affordability.
How Stretched Families Can Deal With Vancouver’s Affordability Crisis
Many people, daunted by high real estate prices in Vancouver have started migrating to the suburbs and exurbs south of the Fraser River or someplace in the Fraser Valley.
However, purchasing a home in the suburbs is not an easy solution to the problem of housing affordability. For example, suburban housing prices are skyrocketing.
And commuting into Vancouver from south of the Fraser, or from the Fraser Valley can take several hours each day.
So many Millennials are choosing to leave the region whether they want to or not. Among the many drawbacks, this breaks up the extended family leaving their parents and their grandparents behind.
Although Boomer parents often cannot access the equity in their homes, there are two innovative ways to get around this problem:
1) Explore Laneway Housing
Laneway housing has been promoted as a way to increase density while keeping neighbourhoods intact.
“We’re seeing this as a family-based solution. Often we see the parents build them for their adult children. So it’s not a silver bullet for the affordable housing strategy but it is one piece in trying to confront the (housing) crisis,” said Vancouver councillor Geoff Meggs in 2013.
A laneway house is a smaller, detached home located where the garage would normally go on a single-family lot.
They’re intended to provide modest-income rental housing for both seniors and young families. Laneway housing can be built for children.
The City of Vancouver has a step-by-step guide to building a laneway house.
The cost to build a laneway home is usually between $250,000 and $270,000. That price includes preconstruction costs of $11,500, excavation and site work of $30,000 to $35,000 and another $175,000-$200,000 for construction.
2) Consider Multigenerational Living
One other solution that requires thinking outside of the box is multigenerational living. Essentially, your children never leave home.
Culturally, Canadians are not wired to think this way — one of the indicators of success as an adult is to at least move out of home. After that, get married, purchase your own home and have children.
However, couples today can’t do that so easily. But the surprising thing is, multigenerational living has been the norm throughout human history.
“Human beings have always been dependent on extended family, and we’re starting to get back to that,” says John Graham, author of All in the Family: A Practical Guide to Successful Multigenerational Living.
There are many benefits. It makes it easier to pass on intergenerational wealth when adult children remain at home. Families can remain together and can even split the bills. And potentially extra, vacant rooms can be utilized more effectively, increasing density.
For aging parents, living or spending time in a multigenerational home can be helpful.
Intergenerational connections can help both older and younger people feel cared for and valued. Research shows that intergenerational programs increase self-esteem and feelings of well-being for older and younger participants. Friendships between older and younger people help make communities stronger.
Tips on Making Multigenerational Living Work
Still, most families in British Columbia are unused to the concept of adult children living at home. Here are some tips for doing it well:
1) Discuss the the different circumstances with your family so that everyone is on the same page as to why you are living together.
If it’s a temporary situation, let your family know what your situation is.
2) Define the responsibilities surrounding those who need to be cared for.
3) Discuss boundaries as a group, as they must be respected by each household member, from the youngest to the eldest.
4) Let parents raise their own children.
5) Decide ahead of time who will be responsible for paying bills.
Are you being affected by the high cost of Vancouver real estate? Let us know in the comments.