If you’re feeling frustrated, stressed out or simply drained when it comes to figuring out your long-term housing plans, you’re not alone. Housing affordability is creating a generation of long-term renters who are facing many barriers into traditional homeownership. If you’re a renter who’s struggling to get into the housing market, here’s how you could end up being stuck on the rental treadmill and what to do about it.

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You keep saving, but prices keep going up

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The days of saving up for a couple of years for a down payment while renting, and then buying your first home are long gone. In fact, it takes the average first-time Canadian home buyer 24 years just to save up enough for the typical 20% down payment. What’s more? The longer you save, the more housing prices seem to increase. In fact, in 2021 Toronto posted the highest drop in housing affordability. The National Bank of Canada's 2021 Housing Affordability monitor posted that housing affordability reached its worst point in 27 years. And while housing prices are rising, income growth is not following suit at the same rate. While home prices in Toronto rose by 16% in 2021, median household income only increased by 0.9%.Additionally, many feel that the ‘Housing headache’ is shifting its way to the rental market. While rental rates in Toronto faced a decline during the onset of the COVID-19 pandemic in 2020, now in 2021 we are seeing them trending back up again. With prices rising at significantly greater rates than income growth, it's no wonder that one of the biggest fears about homeownership among Canadians is not being able to get into the market and if you are among the lucky few, becoming house poor once you’re finally an owner.

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You’re unable to qualify for a mortgage

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If you are able to save up enough for that 20% down payment, an additional barrier can be becoming approved for a mortgage. When applying for a mortgage there are a number of factors that will be considered. A top consideration is a steady income, this creates a large barrier for those who are self-employed. As lenders often view you as a greater risk, you are less likely to be approved. Qualifying for a mortgage presents an additional barrier for people who have recently immigrated to Canada. Because they are not able to transfer their credit report, they have to begin building credit again which can take years.  Additionally, the 2021 RE/MAX Report found that the implementation of a higher threshold for the Mortgage Stress Test is a key barrier impacting personal housing affordability. So if you find yourself stuck on the rental treadmill, what can you do now? Here are a few options.

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Try reducing rent cost

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There are a few ways of reducing your renting costs that could help you save up quicker for a downpayment. Living with roommates can help feasibly cut costs, as you will be able to split your rental cost and fees such as utilities and furnishing. Another strategy is moving back in with your parents, while this may not be possible for many, it can cut costs significantly while you are trying to save. Another popular method of reducing your rental cost is moving to a cheaper neighbourhood. Unfortunately this may involve longer commute times.

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Look into alternative housing options

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Many Canadians are beginning to explore alternative housing options. One such option for someone who wants to get their foot in the door to the housing market is renting out a portion of their home. This can allow them to make passive income while paying off their mortgage.

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Explore innovative homeownership models

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If you’re tired of feeling stuck on the rental treadmill but aren’t ready to take on a mortgage, innovative solutions like Key’s homeownership model could be the answer. Key enables you to move into a home with as little as 2.5% down, while offering a clear and guided path to full ownership. Unlike rent-to-own models, Key doesn’t require you to immediately qualify for a mortgage, removing one of the biggest barriers to homeownership. The housing market has left many Canadians feeling locked out, but there are options to move forward. Key’s program is designed to help aspiring homeowners access the market sooner, without the challenges of traditional ownership. Learn more about how Key's program works here.

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