North Americans are known to move through a fairly predictable “housing life cycle.”
Phase 1 is living in tiny apartments next to the downtown core during university and the first years of one’s career. Phase 2 usually kicks in when people start having kids, which prompts them to leave behind condos and roommates in favour of a home with a backyard. Then, typically around the beginning of retirement, comes Phase 3: downsizing.
Older millennials — those born in the 1980s — are now having children and entering Phase 2. Canadian women are having their first baby at 30, on average, around six years later than the typical age at first birth in the 1950s and ’60s, according to Statistics Canada. But that shift forward is much smaller compared to the delay with which boomers may hit Phase 3 of the homeownership cycle.
Forget moving to a smaller home at 65. Boomers, many of whom are now hitting their 60s, aren’t expected to start downsizing in a meaningful way until at least 2040 or later, when many will be in their 80s, according to a 2018 Ryerson University study of the Greater Toronto and Hamilton Area (GTHA) funded by the Ontario Real Estate Association.
That’s a problem for millennials who are dreaming of a home with front and back lawns — or at least one with a few more bedrooms. Baby boomers own most of those houses and aren’t inclined to move out anytime soon — if at all, according to Darrell Bricker, CEO of Ipsos Public Affairs.
A survey of boomer homeowners conducted by Ipsos for HomeEquity Bank last year found that fully one-half said they have no plans to downsize at all.
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Many reasons not to downsize
Canadians who turned 65 between 2015 and 2017 can expect to live another two decades, according to StatCan. For many, the physical exertion of things like climbing stairs, cleaning gutters and picking weeds won’t be an issue for years, Bricker said.
There are many other reasons for boomers not to downsize. Some are finding that trading their single-family home for an apartment won’t free up as much cash as expected once transaction costs are factored in.
In some places, like Vancouver, where the market has turned from sizzling hot to stone cold over the past couple of years, some have been forced to push the pause button on downsizing simply because they can’t sell their home. With sales of detached homes in the city at a 28-year low, even boomers who do want to move to a smaller place are having to shelve those plans for now, said Vancouver real estate agent Steve Saretsky.
On the other hand, those who never want to downsize have more ways to do so. Reverse mortgages, which are growing in popularity, allow Canadians aged 55 and over to draw down on a portion of their home equity in exchange for payments that typically boost their retirement income — all while maintaining the ability to live in their home.
Further down the line, at-home long-term care is also expected to allow more aging boomers to stay put until the very end, Bricker said.
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Jobs tie both boomers and millennials to the largest cities
In the near future, though, one major reason that’s going to keep boomers in their current homes is the desire to keep working well beyond age 65.
“They usually go through what’s called ‘bridge employment,'” scaling back their hours but continuing to work, Bricker said.
“This means they have to have some access to what provides them with working opportunities, which is usually the city,” he added.
But cities are also where the jobs are for millennials.
Take Toronto and its surroundings, for example. While the downtown core of Ontario’s capital added more than 150,000 jobs between 2006 and 2016, some of the smaller communities in the region saw net job losses over the same period, mostly due to declining employment in manufacturing, according to a study authored by urban planner Pamela Blais for the Neptis Foundation.
The Ryerson study, which focused on a similar area around Toronto and Lake Ontario, forecast a potential deficit of around 70,000 houses with backyards as millennials’ demand for family-friendly properties grows over the next decade.
Bricker sees similar forces at work in Canada’s other major real estate markets. Almost 40 per cent of the country’s population, he noted, now lives in just four cities: Toronto, Montreal, Vancouver and Calgary.
Immigration is also adding to those pressures, with most newcomers clustering around the big urban centres, he added. Thanks to immigrants, Canada has the fastest population growth among the G7 group of industrialized countries.
“More and more people are flocking to the city, and unless you’re creating a huge new supply of housing, they’re just simply going to drive the price of houses up,” Bricker said.
According to Statistics Canada, almost 85 per cent of employed Canadians live in urban areas.
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Where will millennials raise their families?
Impossibly high real estate prices are pushing many young Canadians into suburbs further and further away from the big cities. A recent report by RBC found there were 13,200 more millennials who moved from Vancouver, Toronto and Montreal to areas within the same province than millennials flocking the opposite way last year. Taken together, that outflow has more than tripled since 2015 in the three cities. In Vancouver alone, the exodus has increased almost eight-fold.
But all three cities are also drawing plenty of new, young blood, the same research found. The inflow of 20- to 34-year-olds coming from out of province or another country more than makes up for those who are packing up in search of more affordable digs.
In Toronto, economist Diana Petramala, who co-authored the Ryerson report, sees generation Z — those born starting in the late 1990s — gradually joining and eventually replacing millennials in the city’s condo towers. Meanwhile, those upsizing to start families will likely be forced into long commutes between a downtown job and an affordable home in a distant suburb. A smaller group of millennials will adapt to raise kids in condo apartments, she added.
Meanwhile, a growing share of Ontarians is set to age in outsized homes. One analysis by the Canadian Centre for Economic Analysis estimated the province currently has five million spare bedrooms, mostly owned by overhoused homeowners aged 65 and over.
Down the line, Bricker sees some young families flocking back to those empty nests.
When boomers start entering their 80s, and their children live an hour and a half away in the suburbs, perhaps it will make sense to divide up grandma and grandpa’s house, he said.
Adult children will take care of their aging parents, who will, in turn, help with child care.
That way, Bricker said, everyone gets to live “in the best possible neighbourhood.”