Yes, younger people do have it worse

Older homeowners are insulated from the housing market

RBC Housing Affordability report

Responding to someone on Reddit (who talked about housing in Vancouver always having been expensive, going back to the 1990s):

I'm not sure most older homeowners in Vancouver realize just how much things have changed over a relatively short period of time, and how bad things have gotten for younger people and renters.

There’s really two problems: low vacancy rates and high rents in the rental market, and first-time homebuyers being locked out of owning.

For first-time homebuyers: See the most recent RBC Housing Affordability report, which tracks ownership costs (mortgage, property tax, utilities) as a percentage of household income, going back to the mid-1980s. Vancouver is on page 3. You can see a huge spike in unaffordability over just the last three years - when Covid hit, more remote work => people needing more space at home.

If you look at condo affordability, you can see that the cost of ownership was around 30% of household income in 2000, rose to over 40% around the 2008 financial crisis and then came down again (prices are "sticky downward", they drop slowly). The cost rose much more quickly around 2016; demand-side measures (foreign buyer surtax, vacancy taxes, land ownership transparency registry, etc.) brought prices down again. But then Covid hit. Owning a condo now requires 60% of household income.

This is simply out of reach for anyone who's not already a homeowner, all the way up the income scale. I think you'd need an income of $200,000 (top 1%) to be able to buy even a small condo.

The key thing to remember is that in general, prices reflect scarcity. In the case of housing, what this means is that when we don't have enough housing - when we're not building housing fast enough to keep up with jobs - prices have to rise to unbearable levels to force people out, matching those remaining with the limited supply of housing. That's why prices have been rising so much faster than local incomes: if they were only rising at the same rate as local incomes, they wouldn't push people out.

Advice for younger people to cut out Starbucks and avocado toast isn’t going to help: if everyone follows that advice, all that happens is that prices rise. When we don’t have enough homes, some people have to get forced out.

To me the answer seems pretty obvious: we need to build a lot more housing. I think of it as the "next level up": gentle density (multiplexes, townhouses) in residential neighbourhoods, six-storey apartment buildings within walking distance of SkyTrain stations or the central business district, taller high-rises at stations.

There's a very interesting CMHC report from 2018 which notes that in the Montreal metro area, the selling prices of housing per square foot closely tracks construction costs, and when prices go up, homebuilding goes up. In Vancouver and Toronto, in contrast, there's a huge gap between selling prices and construction costs - this is a massive incentive for people to build more housing, the problem is that it's really slow and difficult to get permission. (A recent example - not being able to replace an old three-storey apartment building in Kits Point with anything other than single-detached houses or duplexes.)

What we want to do is build enough housing to close that gap. Construction costs in Vancouver aren't that much higher than in Montreal.

You might argue that homeowners are always going to fight densification tooth and nail, because they don't want to see their house values drop. In fact what happens is that higher-density housing gets cheaper (because there's more of it), while lower-density housing keeps its value (because it can be redeveloped); Auckland did this in 2016.

In other words, we should be able to get back to the long-ago days of 2013, when Kerry Gold was reporting that there were too many condos, and they weren't a good investment. Apartments are like cars - if we need more, we can just build more.

David Eby and the BC NDP government are pushing pretty hard to override local opposition to housing. The paradoxical thing is that new housing is popular at the regional or provincial level, despite being unpopular at the local level. Even at the city-wide level, in the 2022 election the NIMBY candidate (Colleen Hardwick) only got 10% of the vote.

Nolan Gray:

Gray was talking about older folks in extremely expensive neighborhoods that were once middle class, and how these older residents will wonder why, for example, their children are leaving, and they feel lonely and isolated in their retirement years. “Their community has been destroyed by not allowing the built environment to change,” he said.

More

RBC publishes a housing affordability report every quarter, tracking the cost of owning a home as a percentage of household income.

National Bank of Canada just published a housing affordability report, including how long it would take the median household to save up for a down payment for the median home, assuming a savings rate of 10%. (In Toronto: about 25 years.) This was somewhat garbled in the press coverage.

Kathryn Schuetz, Fixer-Upper:

Long-term homeowners in particular often have very little sense of how expensive it is for newcomers to join their community; their guesses of prevailing rents are anchored to outdated information. Several of the 2021 Democratic candidates for New York City mayor estimated the average price of homes in Brooklyn to be around $100,000 - well below the actual figure of $900,000.

A story from Victoria: My Boomer Dad got a shock.

My dad owns a house in a nice part of town. Older home, but reasonably updated. Nothing super special, bought on a single income after my parents divorced.

Fast forward 18 years to today, 2023. His neighbours just rented a very similar home, $5000/month. He couldn't believe it, "How can anyone afford those prices?"

I showed him some listings and sales nearby, nothing under $1.25m no matter how old and dated. After showing him how the budgets would work with monthly payments, property tax, utilities and such. It worked out to 150% of his income.

We worked out, using his wage at retirement all he could afford was a one bedroom condo, in an older building, if he had a 20% down payment. He finally saw how a young person today couldn't afford any level of housing, unless it was with a parent, or with a parent helping out in some way.

Watching someone who has been out of touch with the market for so long suddenly being brought up to speed on the costs was remarkable. Just head-shaking disbelief on what has happened in just a few years.