It’s time for the housing market to evolve

For the second year in a row, the Canadian housing market continued its record-breaking rise in price growth and home value. According to the Canadian Real Estate Association’s home price index, which adjusts for pricing volatility, the typical price of a home rose 26.6 per cent in December compared to the previous year, hitting a new high of $811,700. In urban cities like Toronto, that number has scaled to over $1-million. For many young Canadians, these astronomical prices make homeownership an impossible goal. As a new generation comes of age, it’s time to embrace a new, tech-enabled model to combat our rapidly developing national housing crisis. For young Canadians today, it takes an average of 28 years for the typical home buyer to save for the recommended down payment in Toronto, and 36 years for Vancouver, according to a report by the National Bank of Canada. So, someone graduating today and starting their career will be in their late thirties or forties before they've had a chance to save enough. That’s more than two decades locked out of the market while prices continue to accelerate. Daniel Dubois is co-founder and president of Key, a Toronto-based real estate technology company. Photograph courtesy of Daniel Dubois Tighter lending criteria and higher interest rates on mortgage loans are also making homeownership unaffordable to those without much credit history. With interest rates all but guaranteed to rise in the coming months, this affordability gap is set to widen—making the path to homeownership even more unattainable. It’s a crisis that isn’t limited to young Canadians. It also impacts frontline workers, entrepreneurs, white-collar workers, immigrants, and parents struggling to help their children get a head start. The reality is—well-meaning as they may be—the current solutions being offered by federal and provincial governments to mitigate the homeownership accessibility crisis with policy proposals are simply not enough to help Canadians. Instead, to make housing affordable for more Canadians, it is crucial that governments look to partner with the private sector. Housing is a significant and substantial challenge. Harnessing private capital and innovative Canadian companies with federal and provincial government funding and building more stratified supply will offer new pathways to homeownership. This will be essential in creating a more prosperous and equitable path forward that doesn’t leave so many Canadians and future generations off the property ladder. Homeownership should be accessible to all Historically, traditional mortgaged homeownership has been the foundation of Canada’s housing market, with around 40 per cent of home buyers taking on a mortgage. In recent years, however, younger Canadians have been sitting on the sidelines, waiting for the market to become affordable. This has created an opening for investors—multi-unit owners, large corporations, developers, family offices—to grow their real estate portfolios and benefit from the rising market. According to a 2022 report by the Bank of Canada, first-time buyers made up 47 per cent of the market as of June 1, 2021, down from 53 per cent at the start of 2015. While investors purchased twice as many homes in June 2021 as they did in June 2020, that’s a 100 per cent increase in the number of purchases. And it’s also worth noting that, of those first-time buyers, many were only able to do so through the generosity of family. In fact, in a recent KPMG survey of millennials who had recently purchased a home, 46 per cent admitted to getting help from their parents. This puts incredible pressure on Canadian families, especially those not in a position to help fund their children’s dream of homeownership. We are at a crossroads: if trends continue, most young and middle-class Canadians—especially those who want to live and work in urban centres—will not be able to afford the traditional idea of a home. With no signs of slowing investments in real estate, policy-makers should turn their attention to innovations that put everyday Canadians on par with real estate investors. Technology has solved similar issues in the transportation, healthcare and food sectors, now it's time for real estate to evolve. Evolving the traditional idea of ‘ownership’ In addressing the issue of housing accessibility, we must push the envelope of innovation that allows more people to get on the property ladder faster. To allow for such innovation, governments need to support the creation and scale-up of private market solutions in public-private partnerships. Such initiatives will multiply government impact, work at scale, and sustain themselves. Governments have assets and levers—including fiscal spending, guarantees, land, zoning policy, and cost-reduction incentives—that, if applied to reduce risk and maintain or improve returns, will attract more private sector investment. In turn, this could lead to the conversion of a significant amount of existing investor-owned supply and to building new accessible supply at scale, with fewer public dollars and higher multiplication of those dollars. As we look to come out of the pandemic, making homeownership accessible for everyone—from gig workers to teachers, nurses to new Canadians—will play a role in rebuilding our urban centres. An efficient co-ownership model allows aspiring homeowners to build equity with a smaller investment, allowing more young people to participate in the market without the financial or geo-topical constraints incumbent with a large mortgage. Technology allows for both sides of the co-ownership equation to benefit, from accessing inventory discovery and selection to background and credit checks, equity management, and payments all in one place. In embracing this tech-enabled co-ownership model, a new generation of Canadians will be able to enter the market on their own terms. Making homeownership part of sustainable equity planning rather than relying on a financial gift or taking on massive debt. As policy-makers consider solutions to the complex housing accessibility problem, solutions that enable Canadians to prosper from real estate without adding financial stress and unaffordable levels of debt will be essential in providing a chance for a new generation to earn equity in a responsible and more equitable manner. Daniel Dubois is co-founder and president of Key, a Toronto-based real estate technology company. The Hill Times

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As a new generation comes of age, it’s time to embrace a new, tech-enabled model to combat our rapidly developing national housing crisis.

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It’s time for the housing market to evolve

As a new generation comes of age, it’s time to embrace a new, tech-enabled model to combat our rapidly developing national housing crisis.

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