Rarely a day goes by that I don’t see a headline about Canada’s housing crisis. Escalating prices, and bidding wars over rental properties, are enough to give anyone a headache. And we’re not alone. Affordable housing is a concern in other countries as well. Today, I continue my Financial Literacy Month series by bringing some perspective to our housing situation. Plus, I’ve got 7 ways to make home ownership more affordable.

This post was originally published in November 2021 and updated in November 2024.

A look at the numbers

According to the Canadian Real Estate Association, the average price of a home in Canada in November 2024 was $694,411, up 7.4% from last year. That’s a lot of money.

Locally, in the medium-sized market of Waterloo Region where I live, the overall average home price in the November 2024 was $754,604. That includes condos and townhouses. For a detached home, the average price was a whopping $862,690 in the same period.

Although prices have cooled since the peak of the market in 2021, prices continue to rise. As a mom of two young adult daughters, I worry about where they’ll live and how they’ll afford housing.

But this isn’t a new concern. Let’s look back.

Escalating prices aren’t a new problem

It may be hard for young people starting out today to imagine but I, and many other people my age, once thought I’d never afford a home.

It’s interesting to look back and compare what my parents paid for their house, to what we paid for ours and what it’s worth today.

• In 1973, my parents bought a brand new three-bedroom semi-detached house for around $24,000. At the time, you could buy a modest detached house for around $30,000.
• Twenty years later, at the end of 1993, my husband and I paid $147,000 for our three-bedroom detached house. That’s six times the price my parents paid for their house. If you compare apples to apples and look at the price of a detached house in the early 1970s, we paid five times as much.
• Fast forward to today, and our house is worth around $750,000. That’s about five times what we paid for it 30 years ago.

So, relatively speaking the change in price across generations isn’t that different. But there are a few troubling trends that make it more difficult for young people looking to buy their first home today.

What’s different now?

Three trends make it harder for today’s young people to afford their first home.

First, young people today are more likely to be working in precarious employment—part-time, contract and gig work—than my generation was at their age. That lack of security makes it much more challenging to enter the housing market.

Wages haven’t kept pace with housing price increases. In 2021, Global News reported that the average national house price in Canada was equal to more than seven times the average national household income. In the mid-1990s, when we bought our first home, that ratio was just under four times.  

Finally, today’s young people are starting out with higher levels of student debt. Debt repayments make it more difficult to save a downpayment for a house.

Even when you factor in lower interest rates—currently around 4% for a 5-year mortgage compared to 8.75% when we bought our home—it’s clear that affordability is a concern.

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7 ways to make home ownership more affordable

Despite the challenges, many people still dream of owning their own little corner of the world. If you want to get into the housing market, there are things you can do to make home ownership more affordable.

Buy only what you need

As our families have grown smaller, our houses have gotten bigger. Do we really need all that space? This article from the National Post looks at housing sizes over the years. When my parents bought their house in 1973, the average size of a new home was just over 1,000 square feet. Over time, that ballooned to 2,300 square feet. There has been a slight downward trend in recent years but, if the government really wants to solve the housing crisis, there needs to be a focus on building homes people can afford.

When I look back on our life, one of the smartest financial moves we ever made was buying a modest sized home, paying off the mortgage, and then staying in that house instead of upsizing. We did think about moving to a bigger house when our kids were small. Then, I reminded myself my parents raised four kids in a house far smaller than the house we were raising two kids in. Ultimately, we decided to stay put, freeing up money to enjoy life, and to save for retirement and our kids’ education.

The point is, be realistic when putting your wish list together. Focus on what you need instead of what your friends and family have. Make a list of features and honestly assess whether they are wants or needs. Not only will a smaller house mean lower mortgage payments, but you’ll also save money on furniture, heating, electricity and maintenance.

Shop around for the best mortgage

Shaving 0.25% off your mortgage rate may seem insignificant but it can save you thousands of dollars over the long term.

When shopping for a mortgage, most people just go right to their bank. That’s a logical first step. But you can save money in interest by looking beyond the big five banks. It may be worth your while to engage a mortgage broker to find the best mortgage for you.  

And when you’re looking at mortgage, look beyond the rates. The best way to save on interest is to accelerate your payments and make lump sum payments. If you think you’ll be able to do that, make sure your mortgage has the flexibility for you to do so. 

Consider a property with income potential

A property with income potential can solve the affordability issue. We’ve seen several properties in our neighbourhood where new owners have duplexed the house and created a rental property to offset the costs of home ownership.

If you’re buying a house with a rental unit, or thinking about duplexing an existing property, make sure you know the laws in your municipality.

Save money on furnishing

The purchase price of a home is just the start. Once you’ve bought it, you need to furnish it. Don’t rush out to fill your home with brand new items—especially if that means going into debt with a high-interest buy now, pay later scheme.

You can save money by buying second hand. Check out your local thrift store. Online marketplaces and Buy Nothing groups are also great ways to save money on used furniture and household items. And if you have family members and friends who are downsizing or decluttering, don’t be too proud to take what they’re offering.

Consider moving outside of major urban centres

The rise in telecommuting has made it possible for many people to move outside of major urban centres. Property prices are cheaper in the suburbs or bedroom communities than in the city centres.

Before making this leap though, think about the lifestyle you want to lead. If you love city life and will spend all your time and money travelling into the city, the money you save may not be worth it.

Commuting time and costs can add up. Consider also how a job change, or a telecommuting policy change from your current employer, could affect your budget.

Try some DIY

Buying a house that needs a bit of work can be a way to save money. If you’re willing to learn and try a little DIY, you can save some money on the initial purchase price and on any work that needs to be done later.

Be realistic though. If you’ve never done any DIY before, you’ll probably want to start with small things like painting and decorating, before you rip apart your kitchen or bathroom for a major renovation.

Look into government programs to help finance

Most governments recognize housing affordability as a significant concern, even if they’re slow to act to solve for it.

There may be government programs to help you finance your home purchase. In Canada, for example, the Home Buyers Plan lets first time home buyers take up to $60,000 out of their RRSP (Registered Retirement Savings Plan) to use as a downpayment for a house. And the First Home Savings Account (FHSA) introduced in the 2022 budget lets you make tax-deductible contributions of up to $8,000 a year toward your first home. You can find information on tax credits and other programs on the Government of Canada website.

Make sure you read all the terms and conditions of these programs to make sure you qualify, and they make sense for you.

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Finally, home ownership isn’t the right move for everyone. Many people are happy as renters because they don’t want the burden of owning a home and dealing with maintenance. But if owning your own home sweet home is your dream, don’t give up. It may take a little longer to get there, but it is doable. Take a good look at your budget to find ways to save or increase your income. When you’re young, you’ve got time on your side!

Do you have other tips to make home ownership more affordable? Share them below.