When Stéphanie Chouinard and her husband, Sean, were looking to buy their first home in Toronto this year, they discussed how kids would fit into the picture — searching for a home near a French school, but also one that offered enough space.
The couple had been living in a one-bedroom rental, and despite saving, recognized that some areas were out of reach. Their search narrowed in on East York, but even there, Chouinard said any “livable” houses or townhouses they saw were north of $800,000.
So a federal program offering help to first-time home buyers, which capped purchase prices at around $505,000, wasn’t an option.
“When we saw that program, we knew right away that this wasn’t going to be helping us at all,” said Chouinard.
While their combined income was enough for a family-sized home — and high enough to also render them ineligible for the incentive — Chouinard believes the federal rules may have excluded other young families who were looking to have children in their first homes.
“If you have a family or are planning to have a family in the near future, that program will very likely not be of much use to you,” she said.
And though a federal economic update this week outlined changes to the program to come for Toronto in the spring, Chouinard believes families looking for something beyond a modest apartment will still be “very, very limited.”
The federal program offers a shared-equity mortgage through the Canada Mortgage and Housing Corporation to reduce the amount that first-time buyers need to save for a down payment and lower monthly mortgage costs. Ottawa pays either five or 10 per cent of the price, and homeowners later pay back that same percentage of the home’s updated value.
In its first year, fewer than 10,000 mortgages across Canada were approved through the program — despite a three-year goal of helping 100,000 families. Alberta and Quebec have seen the most uptake: from Feb. 1 to Sept. 1 this year, there were 712 mortgages approved and accepted in Edmonton, 378 in Calgary, and 55 in Airdrie, Alta., but just one in Vancouver, six in Victoria and 16 in Toronto.
From Sept. 1, 2019 to Feb. 1, there were more than 4.5 times as many approved and accepted mortgages in Calgary than there were across the Greater Toronto Area. Montreal saw nearly seven times as many approved and accepted mortgages as the GTA in that time.
The government has recognized since at least the last election that changes were likely needed for Canada’s hottest markets, and said this week they were coming in spring.
Households earning up to $150,000 instead of $120,000 will soon qualify in Toronto, Vancouver and Victoria, and their purchases can total 4.5 times their income, instead of only four times.
“It’s not going to get you a three-bedroom downtown or anything, but it’s more aligned with the Toronto housing market,” said Heather Tremain, CEO of the non-profit developer Options for Homes.
She sees the changes as positive, but she urged Ottawa to dig deeper into why some may have resisted using it in its first year, including the fact it effectively requires the buyer to pay mortgage insurance, by keeping down payments below 20 per cent.
Tremain believes some first-time buyers may have balked at that extra monthly cost, and pursued other options to try to reach that 20 per cent mark instead. She said she’d also heard concerns from lenders about the government sharing any home value appreciation.
Paul Taylor, president and CEO of Mortgage Professionals Canada, echoed those concerns and added that some buyers may also struggle with the very idea of co-owning their homes.
Though he believes the changes coming in the spring are a “net positive,” he also questioned whether the incentive would be as successful as the feds had projected.
When asked by the Star about the first-year numbers for the program and several of the concerns in this story, a federal department of finance official reiterated in an email the rule changes planned for spring 2021. They would “make homeownership more affordable,” they wrote.
Both Tremain and Ken Bowman of Meridian Credit Union backed the incremental approach that Ottawa seemed to be taking. “I don’t think frenetic change on something as important as a housing strategy is particularly inspiring,” Bowman said. Both speculated that the pandemic may have hindered uptake in 2020.
But UBC professor Paul Kershaw, founder of the research and advocacy group Generation Squeeze, believes a fundamental shift is needed to address the challenges that first-time buyers face in big cities.
While he believes the strategy is “well thought-out,” he urged more attention to the root causes of unaffordability. He pointed to a Generation Squeeze report last year, which found that it took a typical 25- to 34-year-old in the GTA 21 years to save up a 20 per cent payment for an average-priced home.
If first-time buyers were getting older in the city, Kershaw said others may find themselves in the same situation as Chouinard. “They need to have enough space in that home so that they’re not using closets as a nursery,” he said.
Diana Petramala, a senior economist with Ryerson University, said even with the updated rules, new buyers looking near downtown Toronto would be limited mostly to one-bedroom units, or older two-bedrooms. Buying a townhouse might be more possible, she said, in the outskirts — areas like Durham or Simcoe.
While Chouinard and her husband were ultimately able to purchase a first home with three bedrooms within the city, it took a combined household income well above the cutoff for federal help and renting into their 30s to do so.
Chouinard said a friend of hers recently left the city after nearly a decade, feeling it just wasn’t affordable; she suspects others are in the same boat.
“It does eat away at the attractiveness of Toronto as a city for young professionals,” she said.
Victoria Gibson, Local Journalism Initiative Reporter, Toronto Star