Wondering why millennials aren’t buying houses in Toronto? Sure, you’ve seen the news—with headlines like “Toronto’s Young Set On Apartment Building” and “Housing Has No Place In A Housing-Hungry Generation.” Or maybe you saw some of the Millenial reality shows that replaced MTV Unplugged.
Maybe it’s because Toronto’s extremely high housing prices have changed the very meaning of the word “affordable.” According to Bloomberg, an average new home in Canada now costs 2.3 times more than the income of a typical homeowner. Canadian officials predict that by 2041, 63 percent of new homes will be priced above six times the median household income.
In response, Toronto’s mayor, John Tory, who’s 48, is leading the charge for what might be Toronto’s third housing program: rent-to-own. The Toronto Real Estate Board (TREB) polled roughly 4,000 Toronto residents to see whether they wanted a rent-to-own option where they could buy a flat in their late 20s or early 30s.
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According to a recent survey by TREB, 1 in 5 adults (22 percent) were willing to take the first-time buyer’s market: Rent a home in their price range and pay 10 percent of their income over five years to purchase it.
“Home ownership is a dream for many Canadians, but many young people are finding that it simply isn’t within their means,” said Matt Hutchinson, vice president of sales for TREB, in a statement. “We want to provide these young home buyers with the ability to purchase a home at an affordable price point and customize their own experience in a rent-to-own environment.”
According to Bloomberg, New York City rents are at the highest level since 2006. A recent U.S. Department of Housing and Urban Development report says rents have jumped 12 percent in New York and 8 percent in San Francisco, compared to 3 percent in Seattle.
Tory’s new program, and earlier programs, have to do with inclusivity. Housing that allows renters to pay a lower portion of their income for a long time allows them to keep more money in their pocket—whether it’s for an apartment, vacations, or wedding rings. It’s called rent-to-own, and it’s the other way housing is being bought—at a much lower cost point.
In May, REED Housing Canada, one of the first companies to license rent-to-own mortgage programs across Canada, said that rent-to-own transactions are growing at the fastest rate in its history. And 25 percent of REED’s borrowers have incomes between $48,000 and $68,000.
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Toronto’s program is a pilot with a smaller scope and fewer options than REED’s program, but it could be its own model to cash in on Generation Rent. And according to the Canadian TV show “Hot Property,” in cities like Toronto, Seattle, and Montreal, demand for rent-to-own isn’t a money problem; rather, it’s a lifestyle problem.
According to a 2017 survey by Rent Canada Foundation, 71 percent of renters use free advice services and shopping from experts “to purchase a home or apartment.” Moving to a new city, being put in a new apartment building—they all get you in an atmosphere that makes you use real estate as a way to impress and get the apartment you want.
It’s hard enough to make a down payment, when it’s affordable to buy rather than rent. If you have money to spend, you should be putting it to work—not relying on a rent-to-own program to live in the big city.