With growing prices in the real estate market, it’s now a very common practice for parents to help their children financially with a home purchase. A new report from the Ontario Real Estate Association (OREA) has found that up to four in 10 parents of young homeowners (aged 18-38) have helped their children financially in some capacity with their home purchase.
Of the participants polled, these parents “overwhelmingly” acknowledge the growing barriers to homeownership compared to their youth, citing concerns such as home prices, the difficulty of saving a down payment, the job market, and low housing supply. Faced with these new challenges, many young people have had to turn to their more financially established parents in order to purchase a home.
Affordability isn’t the only factor, however, that drives parents to want to help out their children. The older generation also values homeownership highly. Around 91% of parents of children who do not own homes believed that it is important that their children are able to buy a home one day.
On average, parents lent around $40,000 to their children, while those who gifted money outright gave around $73,000. This money largely came from personal savings (44%), though up to 15% drew from their own retirement savings and investments. This puts parents in a tough spot as the older generation approaches retirement amidst the highest inflation rates in decades but the younger generation is faced with their own housing crisis. Clearly many have faced the tough decision to choose between the two when it comes to where their money will go.
While we are seeing a growing difficulty in buying a home, up to 92% of Ontarians believe that it is important we make homeownership accessible to younger generations. Despite this widespread agreement, government intervention has still done little to curtail worsening conditions. While some have been lucky enough to have generous parents, this is simply not an option for everyone and most of these people are simply excluded from the market altogether.
“We are in a housing affordability crisis being driven by severe lack of supply and increased demand,” said OREA CEO Tim Hudak in the report. “Without meaningful action at all levels of government, Ontario’s millennials and young families will be forced to look outside the province for their first home.”
As it stands now, young people are doubtful of their futures in the province and other provinces with more affordable housing have already seen a large influx of those leaving Ontario for somewhere they can afford to settle. According to OREA, around 80% of Ontarians now fins the price of housing is making the province an unappealing place to live and work. While this may be a boon for growing markets outside the province, this also has the effect of not only breaking up families but could also affect the economic future of the province.
On the topic of supply issues, the Ontario Government’s Housing Affordability Task Force has recommended that Ontario should build at least 1.5 million homes in the next 10 years in order to meet demand, or about 150,000 new homes a year.
Yet, in 2021, a year of record housing starts, the province only saw 100,000 starts, a gap of over 50,000 that will need to be filled.
Ultimately, industry and government are going to have to seriously improve their efficiency in new developments in order to meet the rising needs of Ontarians, lest our younger generations are forced to give up the idea of homeownership, which has long been one of the most dearly-held values of the Canadian middle class.