Vancity Millennials Purchasing Power report

8/17/2019 Vancity Millennials Purchasing Power report

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No Funds City:

Why Vancouver millennials have the lowest discretionary income in Canada

Highlights

• Vancouver millennials buying a property at average cost in 2016 have the lowest discretionary income of

10 Canadian cities analyzed.

• If a typical millennial couple purchased a Vancouver property at average cost in 2016 they would go into debt

by $2,745 a year after paying for essential expenses including taxes, healthcare premiums, food, utilities, public

transportation, clothing and housing.

• In 2015, a typical Vancouver millennial household of two, aged 25-34, earned $72,291 – the second lowest rate

in Canada.

• Yearly costs for an average home purchased in Metro Vancouver in 2016 is $44,354.

• Toronto had the next most expensive housing market at an average cost of $33,405 annually for a typical home

purchased in 2016 – $11,000 less per year compared to Vancouver. It also had the next lowest discretionary income

at $3,379 annually for millennial couples who purchased a home at an average price in 2016.

• Millennials in Victoria are better off than in Vancouver, but still ranked third for the least amount of discretionary

income nationally. Millennial couples who purchased a Victoria property at average cost in 2016 have an annual

discretionary income of $12,200.

• By comparison, the average millennial in Edmonton has more than $47,000 in annual discretionary income –

the highest in Canada.

• If a typical millennial couple were to purchase a townhouse at average cost in Vancouver in 2016, their discretionary

income would be $9,548 annually.

• If a typical millennial couple were to purchase a condo at average cost in Vancouver in 2016, their discretionary

income would be $16,422, annually (not including condo fees, which could be as much as $500 monthly).

• Growing families in Vancouver face a dramatically more challenging financial situation. The average cost of

childcare for one child in Vancouver is $14,580 annually.

• With one child in full-time paid care, discretionary income of average millennial couples would be about:

-$17,325 (debt) annually if they purchased a Vancouver property at average cost in 2016

-$5,031 (debt) annually if they purchased a Vancouver townhouse at average cost in 2016

$1,674 annually (not including strata fees) if they purchased a Vancouver condo at average cost in 2016

-$29,597 (debt) annually, not including strata fees, if they purchased a three-bedroom condo at average cost in 2015

$771 annually if they rented a three-bedroom unit outside the city centre in 2016.

• About 16% of families who rent in Vancouver are overcrowded in their current housing arrangement.

• The overall vacancy rate for rented units in Metro Vancouver is under one per cent.

• Among other possible solutions, the report recommends creating incentives for developing affordable,

family-friendly housing and dramatically increasing support for rental housing.

Make Good Money (TM) is a trademark of Vancouver City Savings Credit Union.


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Introduction

As housing prices in Vancouver have risen, so have questions

around how the largest generation in history will afford a

home in an increasingly out of reach housing market. And

are millennials staying in Vancouver or are they leaving for

more affordable markets? Recent news reports point to amillennial exodus from Vancouver and relocation to more

affordable places, like Victoria and Kelowna. Meanwhile,

local entrepreneurs and millennials are adding to the

dialogue by saying unaffordability is emptying Vancouver

of one of its most valuable assets – young people from the

city who want to stay invested in it.

Yet others point to a growing population of 20- to 34-year-

olds in the city: a 9.5% hike in the last 10 years. This increase

could simply be attributed to the fact that this age cohort

is the largest in generation in history, so naturally their

numbers would rise. Furthermore, immigration rules favourpeople under 35, which could create a smokescreen effect

as new Canadians arriving in Vancouver obscure the reality

that a large number of millennials are also leaving.

The question is also not one that is limited to Vancouver,

either. The affordability of other nearby cities such as

Victoria are now being called into question. And earlier

in the year, The Economist published an article labelling

millennials as ‘Generation Uphill.’ Although millennials are

richer, better educated and more connected than any

previous generation, their talents are being squandered. In

rich nations, 15% are NEETs: not in education, employment

or training. That figure rises to 25% in middle-income

countries. The path to adulthood is longer and more

complicated because it is taking longer to get established

and become financially secure.

The millennial conundrum has become particularly acute

in Vancouver, which has built its image as an outdoor

playground. Local economic pressures are putting a fine

point on the realities raised above, with the underlying

question: what will become of Vancouver if the average

family cannot afford to live here? This report brings a

wider focus to this question. By comparing the financial

realities of young people across the country, it is possibleto discover if life in Vancouver is substantially harder

than anywhere else in the country. If it is, this would lend

motivation for families to leave and data for policymakers

to try to stem that tide.

Spend or save: disposable incomeand life enjoyment

The amount of money in your pocket is directly correlated

to the ability to live a happy life. While there is much good

work going on worldwide to attempt to quantify a measureof happiness that goes beyond a simplistic measure of gross

domestic product (GDP), most people intuitively know that

the difference between income and expenses is the basic

economic calculation. This is because people’s lives are lived

in between these margins.

In 2010, Princeton University published a landmark study

that related income to emotional well-being, showing

conclusively that high income doesn’t buy happiness.1

Although people with high incomes report greater life

evaluation (the thoughts people think about their life),

their emotional well-being is no higher than those with low

income. In other words, high income buys satisfaction but

not happiness. However, the study also revealed that money

does buy happiness for those with incomes below US

$75,000. In this income group, increased earning power does

translate into greater well-being.

Clearly a certain basic amount of income is required for a

happy life. Although not analyzed in the Princeton study,

the relationship between income and required life expenses

is important in showing this relationship between money

and happiness. If an individual cannot purchase basic life

requirements (housing, food, health), their emotional well-

being will suffer. Beyond basic expenses, people generallywant to have enough flexibility in their incomes to be able

to also spend time with friends, enjoy leisure, support

others and save for the future. These activities also support

a happy life. However, this desire is not insatiable, as the

Princeton study shows. At a certain point, increased income

can no longer supply increased happiness. (It is beyond the

scope of this report, but we can surmise that once a minimum

level of individual happiness is achieved, social and public

goods become more important to the happiness equation).

As a result, we see that part of living a happy life is having a

little extra money left over after all the monthly bills have

been paid. This difference is called discretionary income –

the income we have, beyond our obligations, to choose to

spend where we want.

It is out of discretionary income that earners purchase

experiences, save for their future and give to people and

causes they care about. In other words, it is out of our

discretionary income that well-being is purchased. This well-

being has a number of dimensions. First, individuals may


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choose to purchase quality of life in the present. They may go

to the movies, upgrade their phone or travel abroad. Second,

they choose to purchase quality of life in the future. This may

be through a savings account, an RRSP or loaning money to

the kids. Third, discretionary income could promote social

well-being: they may buy a gift for a friend, give to a charity

or sponsor a refugee. These things may not have direct

personal feedback, but promote well-being nonetheless.

While all of the above are essential to a rounded life that

maximizes well-being, there is a final use for discretionary

income that is particularly relevant for millennials: paying

off debt.

Millennials are the most educated generation in history.2

This education comes at a high cost, and the effects of

this are at the forefront of millennial minds. A recent

Facebook study of the financial priorities of U.S. millennials

found that 46% define financial success as being debt-free.

Furthermore, 57% prefer to pay for purchases with cash,

reflecting an inherent predisposition away from carrying

consumer debt. So well-being for many millennials means

being able to have enough discretionary income to avoid

credit and pay off their debt.

Vancouver is a world-class city, offering an almost limitless

number of opportunities to increase well-being. Renowned

experiences are outside the doorstep. New businesses and

innovations are ripe to invest in. Social consciousness is

high. And yet, Vancouver also claims the gloomy title of

Canada’s Unhappiest City.3 Insight into relative discretionary

income levels across Canada provides a clue as to a

potential reason for this apparent dichotomy.

A comparison of 10 Canadian cities

It should come as no surprise that the economics of daily life

are tight in Vancouver. Anecdotal evidence and case studies

abound as Vancouverites struggle to cope with some of the

highest housing and food prices across Canada. However,

a deeper dive into the economic lives of young people in

the Vancouver area reveals a disturbing reality: Vancouver

millennials have the lowest levels of discretionary income when

compared to their counterparts in other major Canadian cities.

Discretionary income is the amount of earnings left over

after paying for the basic requirements of life. This is

calculated by starting with gross salary and subtracting

the mandatory government payments of income tax,

employment insurance and pension contributions. From this

figure, payments for the basic needs of life are accounted

for. For the purposes of this report, basic life expenses

include food, housing, utilities (such as electricity and

water), public transportation and clothing. While expenses

such as credit card or student debt payments are included inthis category, these payments are not necessarily common

to all earners and therefore have not been included.

Similarly, while it is true that many Vancouver homeowners

may supplement their salaried income with rental income,

this is not currently the standard and has been excluded

from our calculations. Therefore, the best way to estimate

the experience of Vancouver millennials is to use these

income and expense categories as the foundation for a

detailed analysis show the income levels and mandatory

expenses of two-person families where the oldest individual

is between the ages of 25 and 34.

City Median income Income tax Contributions Healthcare Disposable income

Edmonton $107,120 $17,642 $5,963 $83,515

Calgary $104,581 $17,224 $5,822 $81,536

Ottawa $93,348 $16,563 $6,744 $70,041

Kitchener-Waterloo $84,481 $14,990 $6,103 $63,388

Halifax $82,384 $14,391 $6,214 $61,779

Victoria $80,912 $12,817 $5,313 $1,632 $61,149

Winnipeg $73,198 $12,374 $5,462 $55,362

Montreal $75,284 $14,519 $6,274 $54,491

Vancouver $72,291 $11,452 $4,747 $1,632 $54,460

Toronto $67,744 $12,020 $4,894 $50,829

Table 1: Disposable income for average millennial couple (aged 25-34) by city prior to housing and expenses.

Notes:• BC is the only Province that charges a separate healthcare premuim in addition to taxes.• Income data from Satscan CANSIM 111-0012, 2015 estimate by Vancity• Expenditure data from Survey of Household Spending 2014, 2015 estimate by Vancity• Housing data from Real Estate Board of respective city/region, March 2016, Annual mortgage estimated by Vancity• All figures average, except where noted


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City Disposable incomeTotal expenses

except housingHousing (avg prop) Discretionary income

Edmonton $83,515 $15,505 $20,654 $47,356

Calgary $81,536 $15,505 $24,098 $41,933

Ottawa $70,041 $14,045 $21,494 $34,502

Halifax $61,779 $12,555 $15,337 $33,887


Montreal $54,491 $11,957 $15,619 $26,915

Winnipeg $55,362 $13,060 $16,372 $25,930

Victoria $61,149 $12,851 $36,098 $12,200

Toronto $50,829 $14,045 $33,405 $3,379

Vancouver $54,460 $12,851 $44,354 -$2,745

Table 2: Discretionary income for average millennial couple (ages 25-34) who purchased property at an average cost in 2016.4

Notes:• Income data from Satscan CANSIM 111-0012, 2015 estimate by Vancity• Expenditure data from Survey of Household Spending 2014, 2015 estimate by Vancity• Housing data from Real Estate Board of respective city/region, March 2016, Annual mortgage estimated by Vancity• All figures average, except where noted

Table 2 shows what it would look like if the average millennial

couple in Vancouver tried to purchase an average property

(which includes a condo, townhome or detached single home)

in the current market. The expenses added on top of carrying

this property are by no means an exhaustive list, but still the

numbers are clear: Vancouver millennials are in a tight spot.

In 2015, the typical Vancouver millennial household (two

people aged 25-34) earned only $72,291 – the second lowestrate in Canada. When used to pay Vancouver expenses,

this amount does not go far, especially if millennials opt to

purchase an average property.

From this salary, $16,200 will go to taxes and other

government contributions, and a further $1,632 for

mandatory healthcare premiums. Some employers cover

this cost, though not all, so we have included this in the

list of expenses. This yields $54,460 in disposable income.

Provincial averages for food, utilities, public transportation

and clothing add another $12,850 to yearly outflows. Yet

it is housing that forms the bulk of expenses for young

families: the maintenance costs for a newly purchased home

in Metro Vancouver average almost $44,500 per year.

Taken together, assuming that a key aspect of long-term

well-being is housing security in the form of owned property,

the average millennial household would be going into debt by

almost $3,000 per year. This would leave no income to spend,

save or give away – those key components of well-being.

A primary reason for the lack of discretionary income is that

young people in Canada’s two largest cities, Vancouver and

Toronto, actually have lower average incomes than other

areas in the country. Average household incomes in the age

category are more than $10,000 higher in the innovation hub

of Kitchener-Waterloo and Cambridge, while top-earning

Edmonton surpasses Vancouver by almost $35,000 per

year. The reasons for this disparity are not the focus of this

analysis, yet the disparity warrants further investigation.

However, the larger component of this situation – aside

from the compulsory healthcare fee, unique to B.C. – is the

cost of housing security in the Vancouver area. Temporarilyleaving the question of indefinite renting aside, we see

that average housing costs as a proportion of income in

Vancouver is the highest in Canada.

With the real estate market continuing its rapid rise,

millennial families in Vancouver face an impossible choice.

Do they purchase a home that will annually cost them, on

average, $11,000 more than the next most expensive city,

Toronto? Or will they choose to find a home in a more

realistic market such as Ottawa where a mortgage would

cost half as much? Until there is a broad cultural shift away

from home ownership or more long-term stability in the

rental market, this seems to be the only choice if a family is

going to pursue an acceptable level of well-being.

It should be recalled that the expenses included in this

analysis are ones that are understood to be those basic to

life. Yet for a young couple or family there are typically many

additional expenses, such as student debt, extended health

care and car payments or maintenance among them. Any

of these outflows could put a young family into a pattern

of debt that would be difficult to escape. No wonder many

young people still remain reliant on their parents to make

major life advances in higher education or to buy a house.


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The new reality: shared walls and

smaller footprints

For the next generation, the urban reality is changing. The

figures above show that the average property in Vancouver,

and even Toronto, are simply out of reach for the average

young family. Even if this generation has not fully given up

on property ownership, the possibility has been pushedoff by decades. Now is the era of multiple-unit housing for

young families.

As is seen in Table 3, millennial couples are vastly better off

if they limit their options to condominium-type dwellings.

With a disposable income of almost $54,500, the $25,000

worth of mortgage payments per year is much more

achievable. This will leave an average of $16,422 in disposable

income for this couple – slightly higher than Toronto, but

still not much closer to other areas in the country.

CityDisposable

income

Expenses except

housingHousing (condo)

Discretionary

income

Edmonton $83,515 $15,505 $13,665 $54,345

Calgary $81,536 $15,505 $15,309 $50,722

Ottawa $70,041 $14,045 $14,080 $41,916


Halifax $61,779 $12,555 $15,622 $33,602

Victoria $61,149 $12,851 $17,469 $30,829

Montreal $54,491 $11,957 $12,604 $29,930

Vancouver $54,460 $12,851 $25,186 $16,422

Toronto $50,829 $14,045 $21,187 $15,597

Table 3: Discretionary income for average millennial couple (aged 25-34) who purchased a condo at an average cost in 2016.

Notes:• Housing data from Real Estate Board of respective city/region, March 2016, Annual mortgage estimated by Vancity• The WinnipegREALTORS® Association does not report on benchmark condo prices.

While just over $1,350 in discretionary income per month is

not an abundance, it is enough to be able to spend a bit and

save a bit to build a little happiness now and security for the

future. However, it should be noted that these figures do not

include condo fees, which can get close to $500 per month.

The discretionary income is dramatically less for those who

purchase an average three-bedroom condo in Vancouver (a

more suitable size for a growing family). In this instance an

average millennial couple would be in debt by more than$15,017 annually (see chart in methodology).

In a similar vein, the townhouse market is more friendly

for millennials to focus on, the average of which will yield

a mortgage payment of around $32,000 per year. This is

due to a benchmark price of $589,000 in March 2016, in

comparison to $815,000 for all properties. Townhomes

offer more floor space than the typical condo – something

that would be attractive for couples who may be looking

CityDisposable

incomeExpenses except

housingHousing

(townhouse)Discretionary

income

Edmonton $83,515 $15,505 $18,394 $49,616Calgary $81,536 $15,505 $18,313 $47,718


Victoria $61,149 $12,851 $26,277 $22,021

Vancouver $54,460 $12,851 $32,060 $9,549

Toronto $50,829 $14,045 $28,863 $7,921

Table 4: Discretionary income for average millennial couple (aged 25-34) who purchased a townhouse at an average cost in 2016.

Notes:• Housing data from Real Estate Board of respective city/region, March 2016, Annual mortgage estimated by Vancity.• Real Estate organizations for Ottawa, Halifax, Winnipeg and Montreal do not report on benchmark townhouse prices.


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CityDisposable

incomeExpenses except

housingHousing (rental)

1-bedroomDiscretionary

income

Edmonton $83,515 $15,505 $11,717 $56,293

Calgary $81,536 $15,505 $12,710 $53,321

Ottawa $70,041 $14,045 $10,834 $45,162Kitchener-Waterloo $63,388 $14,045 $9,413 $39,930

Halifax $61,779 $12,555 $9,675 $39,549

Victoria $61,149 $12,851 $11,014 $37,284

Montreal $54,491 $11,957 $7,788 $34,746

Winnipeg $55,362 $13,060 $10,124 $32,178

Vancouver $54,460 $12,851 $13,668 $27,940

Toronto $50,829 $14,045 $13,552 $23,233

Table 5: Discretionary income for average millennial couple (aged 25-34) who rent a one-bedroom condo outside the city

centre at an average cost in 2016.

Notes:• Housing data from Real Estate Board of respective city/region, March 2016, Annual mortgage estimated by Vancity

• The WinnipegREALTORS® Association does not report on benchmark condo prices.

to grow their family. The tradeoff is that this couple will

see their extra income go down by over 42%, with only

$9,550 to spend, save or give away each year (Table 4). This

translates into a monthly budget of $795 which, while not

much to play with after basic expenses, could be achievable.

Similarly, renting a condo may be a good option in order

to have something leftover to put toward well-being. As

Table 5 indicates, millennial couples who chose to rent a

one-bedroom condo outside of the city centre will have a

discretionary income of $ 27,940 annually.

Adding children: borrowing from

the futureWhile the typical financial situation may be stable in the

aforementioned condo or townhouse for a while, things

dramatically change when children enter the mix. As this model

has been built on the assumption of a dual-income household,

it is likely that both parents will have to continue working after

parental leave. Excluding creative yet common solutions, this

means that the child will enter some sort of daycare.

Although Statistics Canada publishes average expenditure on

childcare, this figure is not particularly helpful in that it includes

all the families that do not use this service. Therefore, the

best way to access childcare expenses is to analyze median

expenses for only the families that send their children into care.

A 2014 report by the Canadian Centre for Policy Alternatives

gives us the most recent Canada-wide data.5

When childcare expenses are added into the mix, the grave

reality of a young millennial family in Vancouver becomes

all too apparent. The couple that has bought into the

property market at the average Vancouver price with one

child in care full-time now finds themselves going into

debt by more than $17,000 per year just to cover their basic

obligations and expenses (Table 6). The discretionary income

is dramatically less for those who purchase an average three-

bedroom condo in Vancouver (a more suitable size for a

growing family). In this instance an average millennial couple

would be in debt by more than $15,017 annually (see chart inmethodology). A similar situation presents itself in Toronto,

in contrast to the remainder of the country. All other urban

centres analyzed maintain a healthy level of discretionary

income, even after paying for childcare. In places such as

Montreal, Halifax and Edmonton choosing to start a family

does not necessarily conflict with the financial and stability

benefits of owning a home.

Pressing on, these young families in Vancouver may choose

to sacrifice the size of their home for the benefit of

staying in the city that they love – a viable option growing

in popularity. Some families may even be able to raisefive children in a two-bedroom condo.6 Although not for

everyone, this tactic generates a tight, but viable, financial

situation. Living in a condo with a young child in daycare is

possible with little money left over for spending on well-

being: somewhere around $150 per month (Table 8). Yet a

townhouse is now out of reach. This would create a lifestyle

that could mean going into debt by $5,000 per year or more

(Table 7). Very clearly the financial reality in Vancouver is not

friendly to young families wanting to make a start.


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City Discretionary income (townhouse) Childcare* Discretionary income with childcare

Edmonton $49,616 $10,140 $39,476

Calgary $47,718 $11,232 $36,486

Kitchener-Waterloo $33,875 $10,680 $23,195

Victoria $22,021 $14,580 $7,441

Vancouver $9,549 $14,580 -$5,031

Toronto $7,921 $15,888 -$7,966

Table 7: Discretionary income for average millennial couple (aged 25-34) with one child in full-time care who purchased a

townhouse at an average cost in 2016.

Source: Canadian Centre for Policy Alternatives, Parent Trap, November 2014* Note: Real Estate organizations for Ottawa, Halifax, Winnipeg and Montreal do not report on benchmark townhouse prices.

City Discretionary income Childcare* Discretionary income with childcare

Edmonton $47,356 $10,140 $37,216

Calgary $41,933 $11,232 $30,701

Montreal $26,915 $1,824 $25,091Halifax $33,887 $9,900 $23,987

Ottawa $34,502 $11,880 $22,622

Winnipeg $25,930 $5,412 $20,518


Victoria $12,200 $14,580 -$2,380

Toronto $3,379 $15,888 -$12,509

Vancouver -$2,745 $14,580 -$17,325


property at an average cost in 2016.

Source: Canadian Centre for Policy Alternatives, Parent Trap, November 2014Note: Childcare figures represent the median cost of having one toddler-aged child in care full-time.

City Discretionary income (condo) Childcare* Discretionary income with childcare

Edmonton $54,345 $10,140 $44,205

Calgary $50,722 $11,232 $39,490

Ottawa $41,916 $11,880 $30,036

Montreal $29,930 $1,824 $28,106


Halifax $33,602 $9,900 $23,702

Victoria $30,830 $14,5808 $16,250

Vancouver $16,422 $14,580 $1,842

Toronto $15,597 $15,888 -$291


condo at an average cost in 2016.

Source: Canadian Centre for Policy Alternatives, Parent Trap, November 2014* Note: The WinnipegREALTORS® Association does not report on benchmark condo prices.


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City1-bedroom

in city centre

1-bedroom

not in city centre

3-bedroom

in city centre

3-bedroom

not in city centre

Vancouver $1,561 $1,139 $3,100 $2,170

Toronto $1,502 $1,129 $2,630 $1,795

Calgary $1,347 $1,059 $2,305 $1,683

Kitchener-Waterloo $1,018 $784 $1,907 $1,606

Victoria $1,123 $918 $1,956 $1,603

Edmonton $1,200 $976 $1,809 $1,491

Ottawa $1,158 $903 $1,891 $1,438

Winnipeg $927 $844 $1,573 $1,417

Halifax $1,033 $806 $1,913 $1,307

Montreal $939 $649 $1,778 $1,108

Table 10: Monthly rent by city in 2016

Source: Numbeo.com

Space for life: the (only) rental option

With the real estate market so tight, it bears consideration

that millennial families may be forgoing the option

altogether and continuing to rent. In Vancouver the rental

market is generally lower and more affordable. Indeed, the

average rent for a three-bedroom unit outside of the city-

centre is reported to be around $2,188 – still the highest in

the country, but much more manageable than a mortgage

payment of $3,696. It is these types of units that would be

most desirable to a young family, as they provide the spacerequired for life and growth.

As is shown in Table 10, this monthly rent still results in

a difficult situation for the average family. When renting

a three-bedroom unit, families in both Toronto and

Vancouver are within range of having zero disposable

income after childcare expenses (Table 11). This makes

renting not much better than purchasing a condo, except

for the fact that the couple would likely be renting more

space than they could afford to buy. If smaller units would

cost less in rent each month (a one bedroom outside of the

city centre is around $1,132),9 then the family may choose

to stay in a smaller unit as their family grows. However, theBritish Columbia Non-Profit Housing Association reports

that around 16% of Vancouver families are overcrowded in

their current housing arrangements: a figure that is likely

to go up if millennial households need to choose between

appropriate housing and discretionary income.10

Renting may be slightly more affordable, but is also unstable.

Families who rent may be given notice at any time that they

must find another home. In addition to the challenge of

finding a suitable home are the challenges that families with

a pet or a child in school would face. Many families would

also have to deal with the social challenges of moving to

a new neighbourhood, especially if a child has to switch

schools. And this doesn’t take into account the desperatelylow vacancy rate in Metro Vancouver.

Families looking for a unit to rent face an overall vacancy

rate in Metro Vancouver that is under 1%.

When rental figures are analyzed, the choice for young

millennial families in Vancouver becomes clear: they can be

under-funded or under-housed. Appropriate housing will cost

them dearly in their bank account: to purchase a townhouse

or rent a three-bedroom unit would mean almost no extra

income to spend, save or give away. As a result, their well-being

budget is either zero or in the negative. On the other hand, to

maintain some income for increasing happiness now and in thefuture, the family would have to choose to be under-housed,

either in a small condo or small rental apartment.

Table 9: Discretionary income for couples in Vancouver who purchased a 3-bedroom condo at an average cost in 2015.

Average three bedroom condo in Vancouver prices are based on city of Vancouver, valid 3 bedroom condo sales (Improved Single Property Cash Transactions) 2015.

Courtesy of Landcor™ Data Corporation.

CityDisposable

income

Expenses except

housing

Average cost for

3 bedroom condo

Discretionary

incomeChildcare cost

Discretionaryincome with

childcare

Vancouver $54,459 $12,851 $56,625 $-15,017 $14,580 $-29,597


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Recommendations

The conclusion of this deep dive into the financial realities

of young families across the country is that Canada’s

two main urban centres – Toronto and Vancouver – are

particularly difficult cities in which to raise a family and have

money left over to nurture and improve well-being. In these

cities, basic expenses eat up the majority of income. And in

Vancouver, this can be directly correlated to skyrocketing

prices for stable, appropriate and affordable housing.

It does not need to be this way. Below are recommendations

on immediate and practical actions that governments,financial institutions and individuals can implement to make

life more affordable for our young families and develop a

higher level of well-being for our urban communities.

Government

Owned housing: As noted in Vancity’s previous report

Housetrapped , various levels of government have the

ability to address chronic housing and affordability issues

and should pursue policy agendas that support reasonable

housing costs. These are reproduced below:

• New housing development tax credits: The federal

government could implement a program of new housingdevelopment tax credits for permanently affordable

family housing. This program should increase rental and

owned homes (including co-ops) with three bedrooms or

more by providing developers with multi-year tax credits

when they invest in housing that provides long-term

affordable housing.

• Inclusionary zoning: Use inclusionary zoning to increasethe availability of family-friendly housing in Vancouver

and Victoria. Zoning bylaws should stipulate developers

must include permanently affordable, three-bedroom or

more housing in multi-housing developments, and allow

them to work creatively with community partners to

achieve this goal.

• Density bonuses: Municipalities could create density

bonuses for family-friendly, affordable housing like

apartments, townhomes, equity and shared-equity

co-operatives, and consider one-time or temporary

reduced fees and property taxes.• Partnerships to support shared-equity co-ops:

Municipalities could enable third-party agencies to

administer affordable housing programs that promote the

shared-equity co-op model, as well as other affordable

home-ownership strategies.

• Programs to support home ownership: The federal

government could create programs and incentives that help

families save towards a down payment. One example is

the U.S. Department of Housing and Urban Development’s

Family Self-Sufficiency program for low-income families.

Under the program, if a family’s rent increases because theyare earning more income, the rent increase is credited to an

interest-bearing escrow account, resulting in savings they

could use for a down payment.

• CMHC coverage: Currently, people seeking financing

for a purchase of a co-op unit are required to provide a

35% down payment. Part of a renewal of equity co-op

legislation should include CMHC coverage, so families

who choose co-ops can also get a mortgage with a

smaller down payment.

CityDisposable

incomeTotal expensesexcept housing

Housing (rental) Childcare

Discretionary

incomewith childcare

Edmonton $83,515 $15,505 $17,988 $10,140 $39,882

Calgary $81,536 $15,505 $20,302 $11,232 $34,497

Montreal $57,491 $11,957 $13,360 $1,824 $27,351

Ottawa $70,041 $14,045 $17,198 $11,880 $26,918

Halifax $61,779 $12,555 $15,440 $9,900 $23,884

Winnipeg $55,362 $13,060 $17,127 $5,412 $19,763

Kitchener-Waterloo $63,388 $14,045 $18,943 $10,680 $19,720

Victoria $61,149 $12,851 $19,240 $14,580 $14,478

Vancouver $54,460 $12,851 $26,257 $14,580 $771

Toronto $50,829 $14,045 $21,478 $15,888 -$581

Table 11: Discretionary income for average millennial couple (aged 25-34) with one child in full-time care who rent a

three-bedroom condo outside the city centre at an average cost in 2016.


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• Repurpose public and community-owned land:

There is significant inventory of urban land owned by

public agencies and community-based organizations

(e.g., churches, service clubs, etc.). This land should be

inventoried and financially assessed to provide an overall

value for potential housing sites with family friendly,

three or more bedroom homes to provide additional

affordable housing options. These redevelopment

opportunities could go beyond adding homes byproviding renewal opportunities for the communities

where these lands are located.

Rental housing: The B.C. Rental Housing Coalition (of which

Vancity is a member) has put forward the following calls to

action by the government:

• Create new supply: B.C. needs 80,000 units of new rental

housing by 2021, of which 25,000 should be subsidized

housing for households that cannot afford market rents. [1]

The coalition is calling on Ottawa to:

a. Meet its platform commitment to provide GST rebateson new rental development and investigate other tax

incentives to stimulate the development of private

rental housing.

b. Target new housing infrastructure funding by need,

rather than population. This means that communities

in B.C. experiencing significant homelessness and

critical levels of overspending on housing should be

prioritized for new developments.

c. Require the B.C. government to match contributions

for all new federal housing infrastructure funding with

cash, land or in-kind support in order to maximizeimpact.

d. Support the creation of a $250 million social finance

infrastructure fund that will leverage a regional

network of impact investment funds to provide

financing for housing development and other durable

social infrastructure.

• Support tenants: Over the next decade more than

20,000 units of social housing will lose their subsidies in

B.C. This includes federal rent subsidies for 4,000 low-

income co-op households. The coalition is also calling on

the federal government to:a. Immediately work with the B.C. government to fund a

rent subsidy program for low-income co-op and non-

profit residents at risk of losing their homes.

b. Repair deteriorating rental housing units in B.C. to

prevent further loss of existing stock.

c. Increase investments in the Housing First approach to

end chronic homelessness.

• Align housing policy: Economic development,

transportation, health care, immigration, refugee services,

aboriginal affairs and other areas of social policy are all

intimately linked to housing. The coalition is encouraged

that federal ministers have been mandated to work

collaboratively across these portfolios and seeks further

collaboration moving forward.

Financial Institutions• Leverage private capital in developing affordable housing.

Financial institutions can work with government and third

sector agencies to pioneer new financial tools, such as

targeted investment funds and community bonds.

Using private capital:

Investment can be funneled to underinvested

neighborhoods and/or affordable housing

developments.

Socially conscious investors can be matched with

opportunities that yield economic returns alongside

measurable impact for communities. These socialequity investors are commonly individuals who invest

in a project for reasonable financial return on their

investment, but who are also willing and able to

provide repayment terms that are favourable to the

projects because they are equally motivated by cultural

and/or social returns.

• Support social finance for affordable housing

developments. Support social finance for affordable

housing developments. Lending or creating innovative

financing for nonprofits and charities to address a gap in

access to patient, working capital for affordable housingprojects. This may include:

Building investment funds with philanthropic or

community partners to deliver near-market returns

to investors and deploy funds to support non-profit

partners with equity that enables an affordable rental

housing project. At the same time, co-op and/or not-

for-profit owners can build their equity stake, and the

project can buy out the invested funds.

Creating community bonds. These are financial vehicles

for mission-aligned donors and supporters to invest

funds into a defined community project that can be

paid back with a modest financial return once the

project is operational. Program-related investments

(provided from the endowments of foundations

to registered charities, and applied to higher-risk,

mission-aligned opportunities like affordable housing

projects), that generate below-market rates of return on

investment, is another option.


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Individuals and families

• Home sharing: many Vancouver families have discovered

that one of the only affordable ways to own property in

the city is to share the monthly costs. This means that space

must be shared in creative ways. Consider purchasing a

home with a secondary suite and rent one of the units out.

Apply the rent to your mortgage and pay it down quickly.

• Co-ownership: this is one step further than home-sharingin that the families that share the property also share

finances. This is beneficial in that it shares the risk and

responsibility of ownership. Two families could purchase

a home big enough for both of them, or a property that

could easily be split into two distinct units.

• Co-operative housing: although housing co-ops are

relatively rare, they are usually priced comparatively lower

than a comparable strata unit. However, government

regulations currently stipulate that a 35% down-payment

is required to purchase an equity co-op.

• Housing is for housing: if you are lucky enough to ownhousing, remember that while property may be a good

investment, it is only one of many. Housing needs to be

utilized for its primary purpose – providing a space to

live in – rather than being used as a vehicle for wealth

generation at the expense of affordable community

dwellings. Consider speaking to your financial advisor

about investing in other wealth-generating areas or

discover ways in which your property investment can

have maximal impact on providing affordable housing

in your community.

• Advocacy: to develop more affordable housing,governments need to have a supportive regulatory

and funding environment. This will only happen

if the public and civic organizations advocate for

this outcome.

Methodology

Calculations in support of this report were undertaken

by Roslyn Kunin & Associates and sourced from publically

available data from Statistics Canada. The methodology

described herein applies to deriving the discretionary

income of the age 25-34 couple families in selected

Canadian census metropolitan areas (CMAs).

Income data was sourced from Statistics Canada’s CANSIM

table 111-0012 (family characteristics, by family type, age

of older adult, and family income) and limited to couple

families where the age of older adult is in the 25-34 years’

age group. To estimate 2015 figures from 2013 values, the

growth rate of primary household income by province

between 2013 and 2014 was applied, which was derived

from Statistics Canada’s CANSIM table 384-0040 (current

accounts – households, provincial and territorial, annual).

The 2014 to 2015 growth rate was assumed to be the same.

Income tax deducted was calculated by applying an average

income tax rate to the amount of median family income.

Similarly, the amount of EI and pension contribution

deducted was calculated by applying the average rate of

such deductions to the amount of median family income.

Average income tax rates, along with average rate of

deduction of EI premiums and pension contribution, were

source from data available from table 384-0040.

The average cost of food, utilities, transportation and

clothing was sourced from the 2014 Survey of Household

Spending (SHS) by Statistics Canada. To estimate the values

of these expenditures in 2015, the annual rate of change

in the Consumer Price Index (CPI) for these cost itemsbetween 2014 and 2015 was applied.

For cost of housing, the value used represents the cost of

a mortgage for a home purchased in these CMAs valued

at the March 2016 benchmark price. This data was sourced

from each CMAs real estate organization:

• Canadian Real Estate Association (for Halifax)

• Calgary Real Estate Board

• Realtors Association of Edmonton

• Kitchener-Waterloo Association of Realtors

• Greater Montreal Real Estate Board

• Ottawa Real Estate Board• Toronto Real Estate Board

• Real Estate Board of Greater Vancouver

• Victoria Real Estate Board

• Winnipeg Realtors

Estimated discretionary income is calculated subtracting the

sum of the cost of food, housing, utilities, transportation,

and clothing from household disposable income.


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City Food Clothing Public transport Utilities Total expenses

Edmonton $6,469 $4,425 $1,552 $3,059 $15,505

Calgary $6,469 $4,425 $1,552 $3,059 $15,505

Ottawa $6,014 $3,905 $1,264 $2,862 $14,045

Kitchener-Waterloo $6,014 $3,905 $1,264 $2,862 $14,045

Toronto $6,014 $3,905 $1,264 $2,862 $14,045

Winnipeg $6,440 $3,129 $1,075 $2,416 $13,060

Victoria $5,997 $3,178 $1,659 $2,017 $12,851

Halifax $5,904 $2,876 $886 $2,889 $12,555

Vancouver $5,997 $3,178 $1,659 $2,017 $12,851

Montreal $6,129 $3,071 $835 $1,922 $11,957

Table 12: Expenses by city except housing

Notes:• Income data from Satscan CANSIM 111-0012, 2015 estimate by Vancity• Expenditure data from Survey of Household Spending 2014, 2015 estimate by Vancity

• Housing data from Real Estate Board of respective city/region, March 2016, Annual mortgage estimated by Vancity• All figures average, except where noted


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References

1. Kahneman, Daniel and Angus Deaton. High income improves evaluation of life but not emotional well-being. Princeton University,

August 2010. www.princeton.edu/~deaton/downloads/deaton_kahneman_high_income_improves_evaluation_August2010.pdf

2. Pew Research Centre, Millennials in Adulthood, March 2014.

3. Lu, Chaohui, Grant Schellenberg, Feng Hou and John F. Helliwell. How’s Life in the City? Life Satisfaction Across Census Metropolitan Areas

and Economic Regions in Canada. Statistics Canada, 20 April 2015 . www.statcan.gc.ca/pub/11-626-x/11-626-x2015046-eng.htm

4. All housing calculations assume a 5-year fixed-term rate of 4.74%.

5. Macdonald, David and Martha Friendly. The Parent Trap: Child Care Fees in Canada’s Big Cities. Canadian Centre for Policy Alternatives,

November 2014. www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2014/11/Parent_Trap.pdf

6. Kerry Gold, “Squeezed, and loving it: 5 kids, 2 adults in a 1,000-square-foot condo,” The Globe and Mail, April 10, 2015.

7. CCPA reports only on Kitchener childcare costs.

8. CCPA did not report on childcare expenses for Victoria. Vancouver figures have been substituted due to geographic proximity.

9. Cost of Living in Vancouver. www.numbeo.com/cost-of-living/city_result.jsp?country=Canada&city=Vancouver , accessed April 22, 2016.

10. Overcrowding figures can be found at http://rentalhousingindex.ca , accessed April, 25, 2016.

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