The boomerang effect is in full swing with more and more millennials forced to lean on the boomer generation for financial support – especially in the tight Toronto and Vancouver real estate markets. And this extended dependency seems to be taking its toll among parents worried about both their children’s futures as well as their own, according to a recent TD survey.
Overall, 62% of boomers feel that adult kids returning to the nest is creating major financial stress for them, as well as hampering their ability to save for retirement. What’s more, for those living in the GTA at least, rebounding kids may also be preventing many older homeowners from cashing in on the current housing boom.
Parents putting empty-nest dreams on hold
Older Canadians often plan to downsize as part of their retirement strategy, but adult children who are still living at home well into their 20s or even 30s are likely keeping many parents from making such a move.
Precarious employment, runaway rents, and hefty student loans have driven thousands of young adults back into their childhood bedrooms and basements, particularly in Ontario’s biggest city. According to the latest figures from Statistics Canada, an unusually high 56.5% of people in their 20s in the GTA are still living with their parents, compared with 42% nationwide.
The report also found that the vast majority of adult kids who are living with their parents aren’t in any rush to pitch in. Nine of out 10 young adults who’ve moved back home admit they don’t help with household expenses, such as rent, taxes or utilities – one more incentive to stay put.
Younger people increasingly stuck in the middle
But don’t be too quick to judge, suggests University of British Columbia professor Paul Kershaw, the architect of Generation Squeeze’s controversial Code Red campaign. The Vancouver-based lobby group maintains that the housing affordability crisis in Ontario is forcing too many young people to put off important milestones, thus compromising a range of family formation aspirations.
There’s no question that this journey back home, along with population growth and immigration, is helping disrupt the housing market. The lack of available houses in the Toronto area has driven up prices – March GTA home prices jumped by 33 % year over year, hitting an average of $916,567 in the 416 and 905 combined – making it almost impossible for younger would-be purchasers to buy.
New GTA listings remain scarce
The more house prices rise, the longer it will take younger homebuyers to save up enough to move out. According to Generation Squeeze’s estimates, it took five years of full-time work to save a 20% down payment on an average-priced Ontario home in 1980. By 2003, it took eight years. Now, it takes 15 years on average.
But as they stay longer with their parents, fewer houses are being put up for sale — and that scarcity is a big reason prices are soaring.
Basic economics says that high prices ought to entice more owners to sell, with gradually added supply helping to relieve some of the upward pressure. But that’s clearly not happening in and about the Toronto real estate market, where, despite ongoing demand, the rate of new listings continues to shrink, affecting new and move-up home buyers alike.
Homeowners increasingly reluctant to downsize
Of course, many established homeowners – with or without kids – simply refuse to budge, no matter how many agents knock on their doors. Nor do they want government or think tanks prompting them to sell either.
Recent suggestions from UK economists that so-called ’empty nesters’ be incentivised to move out of their homes to smaller properties has met with a furious response – and there’s no reason to think Canadian homeowners are any different.
Canadians continue to pour money into aging homes
The truth is only a relatively small percentage of older Canadians actually downsize, since most people, health permitting, really want to age in place. As a result, aging homeowners are increasingly deciding to stay where they are and renovate instead, recent Canada Mortgage and Housing Corporation data suggests.
The Crown corporation notes, when looking specifically at households headed by someone aged 55 to 64, that almost 400,000 Ontario homeowners can be expected to renovate this year.
Ontarians spent an estimated $25 billion on renovations last year, a figure that the housing agency expects will keep increasing in the coming years – particularly within the cohort now approaching retirement.