Sunday, May 22, 2011

No Home to Call My Own

We all need a roof over our heads. So why is it becoming impossible for most of us to have one? Recent numbers regarding housing in Canada has shown that housing prices have increased nationally by 8 percent over the year- well over the 1 percent pay increase that most 'well off' Canadians can expect in their pay- and that the average cost of a home is now $372,544.

That's a staggering amount when you think about it. The average home costs well over a quarter of a million dollars and it's not because of granite countertops. The average home is a semi detached with possibly 2 bedrooms at a commute or a condo in the city.

And another disturbing trend? The percentage of a family's income that goes towards paying housing costs. Finance experts have said in the past, and the Canadian Housing and Mortgage Corporation continues to say, that no more than 30% of your income should be directed towards shelter. Anything more would pose a potential risk to your financial balance, meaning that you are effectively house poor. The national average is now 40.5% according to a recent study by RBC. That means that the nation is effectively house poor and in serious danger of teetering over the financial edge.

Add to that the rising cost of fuel, the newly introduced Harmonized Sales Tax in provinces like BC and Ontario, the wage freeze across the public service which employs the largest portion of the average Canadian families, a fragile economic situation and an expected rise in interest rates, and it may soon be considered a luxury to own a home, not a necessity.

BC is in a unique situation, as their property rates are being driven up by foreign investment, particularly in luxury homes. The majority of this investment is from China, where their economy is booming. And yet, this investment is driving Canadians out of this beautiful province. The average Canadian can no longer afford to live in Vancouver. There is definitely something wrong with this picture.

There needs to be action taken. The government needs to take the proactive stance. They need to find a way to limit foreign investments in Canadian housing markets that drive the prices up for average Canadians and pushes them out of the market entirely. They need to introduce laws that limit the increases that can be imposed on homeowners and renters, so that people can actually afford the roofs that they have over their heads. They need to recognize that average Canadians shouldn't be forced to choose between food and shelter, that they are both basic necessities and not silly luxuries.

The government claims that their main priority is the economy. But if the population can't afford the basics, they also can't afford anything else, which means that there will be no economic stimulation from within. If life isn't affordable, it can't be profitable. It cannot be expected that families will live on less, spend more and play an active role in the economy when they can't keep their home. Wages should also be in line with inflation. People need to be able to keep up with the basic cost of living.

If the government is going to help, these are the ways in which it can help. Making life more affordable is not about cutting the GST (which is also ineffective because some new provinces now have the HST). A consumer tax is only helpful when the base population is spending large amounts of money and average Canadians don't have that money to spend. We don't buy a car or house every year, so the 10 cents that we save on candy bars isn't making a difference when our housing costs soar 8% a year and take up over 40% of our income.

There needs to be an acknowledgement that the basics of life are slipping out of the grasp of the average Canadian, much like it has in the US, where many people have been devastated by their housing market. We've prided ourselves in being more responsible and forward thinking than the US in that respect and this has also been used to explain our fragile economic recovery. But these are just words and nice thoughts without some positive action to back it up. The time to act is now, before the rates run up to 50% and more families are driven to the brink.

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