Millennials are outnumbering Baby Boomers and are quickly becoming the fastest growing cohort in the Greater Toronto and Hamilton Area (GTHA). As the growth of this generation continues, so does the demand for housing. According to a new study released last week by Ryerson University’s Centre for Urban Research and Land Development, 500,000 Millennials will be looking to move out of their parents’ home over the next decade.
While many Millennials are looking to soon move out of their parents’ home, the real issue that resurfaces is the lack of affordable housing in the city. “Affordability is out of reach for many millennials,” Diana Petramala, Senior Researcher at Ryerson University says. “The average income needed to buy a house in the GTHA requires six times more than what millennials make.”
The condo sector has been appealing for those looking at starter homes, as prices are more affordable than single-detached homes. However, as Millennials begin having steadier incomes and deciding to settle down and have children, they are finding themselves opting out of renting in the small high-rise, and into purchasing something more spacious, like ground-related homes (single homes, semi-detached, or townhomes). Unfortunately, while the dream of home-ownership may be there, the reality is slipping away. “They’ve demonstrated clearly that millennials do want to own a home someday and secondly, this will have a massive effect on the marketplace when 500,000 new millennial-led households come into play in the next 10 years,” the report reads. “We simply don’t have the supply to keep up.”
The report also outlines that if supply does not keep up with demand, there will be alarming consequences for Generation Y and the GTHA. For starters, as a result for the strong demand for detached houses, there will be a surge in home prices leading Millennials to take on a higher debt load to afford the type of homes they desire. Debt is not an unfamiliar term to this Generation, as they can have between $20,000 and $30,000 in student debt alone. Income streams have not kept in pace for this group either as many Millennials, who are homeowners, are spending over half their take-home income on mortgages, while still having to cover other living expenses (car, food, utilities, etc.), and as a result are living off credit. Another consequence to be faced is increased traffic due to the lack of affordable housing options in the Toronto core. Therefore, Millennials are likely to move to the suburbs which will result in longer commute times and traffic congestions due to the absence of efficient public transit in these areas. Lastly, high upward pressure on home prices in the GTA are driving young professionals out of the city. According to the report, 42% of Millennials had indicated they were planning to leave the core due to excessive pricing.
While Millennials are indicating their desire to own (58 per cent surveyed in Canada showed interest to buy within the next two years), they will have to save for a little longer in order to afford a down payment. The City needs to work with developers and put more time and money into developing more Missing Middle/ground-related housing housing to retain young professionals and lessen the intensity of upward pricing in the city core.