Dennis and Joyce Short bought their three-bedroom bungalow in London, Ontario’s White Oaks neighbourhood more than 40 years ago for $32,500. Having long-since paid off the mortgage—redirecting those payments to RRSPs—the retired couple, 67 and 68 respectively, have no plans on selling anytime soon.
“Most of the people on the street are still the original owners,” says Joyce. “We like the privacy of our property. We have a big backyard. The street we are on is like a community.”
“It’s just such a great location, we had no reason to ever move,” adds Dennis. “As we get older, it’s even better.”
Setting a trend
The Shorts are part of a growing trend of older Canadians that don’t see value in downsizing. Their homes may have too many bedrooms (according to a 2017 report by the Canadian Centre for Economic Analysis (CANCEA), there are more than five million spare bedrooms in Ontario alone), but benefits—including staying in the community they love, next to the neighbours they know, with the conveniences they are used to—outweigh acquiring a more manageable space, size-wise.
Financially it seems to make sense as well. Even after taking into account any profit from selling (as of June, the average cost of a home in London was $370,247, according to the Canadian Real Estate Association), the Shorts worry they would have to assume another mortgage, while giving up what they have.
“Depending upon where you downsize to, you are not necessarily going to free up a lot of equity.”
“We couldn’t rent a one-bedroom apartment for what it costs to run our household,” says Dennis. “I can still maintain the property, so it’s not an issue at this point…when you feel the constraints, that’s when you make the move.”
Yvonne Ziomecki, executive vice president of marketing and sales for HomeEquity Bank, which recently launched a rebranding campaign, There’s no retirement like home, points to another deterrent—the often overlooked costs of downsizing, including realtor fees, new furniture for a new space and other moving expenses.
“People rarely talk about the real costs of downsizing,” Ziomecki says. “Depending upon where you downsize to, you are not necessarily going to free up a lot of equity. Everything is expensive. And then there are those things that you can’t put a dollar value on.”
A housing crisis
Some say the downsizing delay is directly contributing to a growing housing crisis around the country, with movement on the issue taking place in Ontario—particularly the Great Toronto and Hamilton Area (GTHA)—Calgary and Vancouver.
A report from the Ontario Real Estate Association (OREA) highlights the issue of supply and demand. With approximately 700,000 millennials (See: Millennials: Here’s where they stand in the Canadian housing marketplace) projected to be on hunt for homes in Ontario over the next decade, baby boomers not downsizing hinders the limited housing supply, the report says. The anticipated result? High debt loads, diversion away from urban centres, longer commute and increased traffic as millennials move elsewhere.
The CANCEA report ties the crisis to the type of housing being developed. Coined the “missing middle”, this mid-range, “gentle density” housing—such as semi-detached, row homes, townhomes, multiplexes and courtyard apartments—appeals to buyers looking to up or downsize. According to the report, just 20 per cent of housing in the GTHA falls under this category, while 45 per cent are single-detached homes and 35 per cent are apartment buildings.
Without alternate housing options available, we leave older homeowners’ hands tied.
“It affects both sides of the housing market—early-round buyers moving from condos to something larger and more ground-oriented, to more ageist households who want to move from a traditional detached home into something smaller, but not a condo or apartment,” explains Jason Mercer, market analyst with the Toronto Real Estate Board (TREB). “It’s another issue that has compounded in terms of the lack of supply.”
According to Richard Lyall, president of the Residential Construction Council of Ontario (RESCON), it all comes down to a stringent land development policy and a complex approval process at government level. Without alternate housing options available, we leave older homeowners’ hands tied, he suggests.
“I’m not saying it’s [mid-range housing construction] not happening at all, but it’s not happening on any kind of scale that would have an impact on choice,” he says. “So, what do they do? They could sell and move out to somewhere like Cobourg…they might go down to the States…live at the cottage…or they stay put in a house that has four or five bedrooms that remain empty unless the kids visit.”
A nation-wide issue
Vancouver and Calgary are also experiencing and responding to the repercussions of the ‘missing middle’. In Vancouver, the Vancouver Urbanarium Society ran an open design competition, The Missing Middle, with entrants conceptualizing one or two single-family lot designs to address the city’s housing affordability crisis (Vancouver was rated 13 out of 15 for the least-affordable cities in the world).
Meanwhile, in Calgary—which was rated Canada’s least affordable city for low-income residents in 2017—the challenge was addressed in the 2017 Mayor’s Urban Design Awards, which recognize architecture and design that contribute to the livability of the city and well-being of its residents. A new housing innovation category includes small- to medium-scale residential designs that focus on accessible and affordable neighbourhoods, for the city’s senior population (See: Seniors too ashamed to report financial fraud, say experts), in particular.
Ziomecki acknowledges the housing affordability and availability issue but does not believe older Canadians should be pressured to move out to free up space. “They deserve to make the decisions they want to make and not feel pressured just because we want more housing inventory,” she says. “They should be able to move when they are ready.”
This seems to be exactly what’s happening.
Brian and Margot Foster, aged 70 and 69 respectively, were indeed ready, when they moved from their 2,000-sq-ft, three-bedroom house in Calgary’s Garrison Green complex, which they owned for a decade, to a two-bedroom, 1,500-sq-ft, condo in Lower Mount Royal, a commercial/residential area with access to stores, restaurants, transit and parks. Unlike the Shorts, downtown was a way to keep them out of the ’burbs and close to family, as life shifted into retirement
“We can walk anywhere within the city core,” the couple shared in an email interview. “We did some renovations before we moved in and are happy with our decision.”
“In the short term, people have to make adjustments and figure out what works for them.”
For the Shorts, condo living is not a viable option given the monthly fees and the limited space. “It’s just not the lifestyle that we were looking for. Maybe as we get older, but not at our age,” says Joyce.
With Toronto, Vancouver and Calgary just making the top 10 most livable cities in the Global Liveability Index 2018 report by the Economist Intelligence Unit, perhaps things aren’t as bad as they seem—or maybe it just depends on your perspective. Either way, shifts inevitably will come from several directions.
“Over the long term, it’s going to take some policy [change] and thoughtful urban planning,” says Ziomecki. “In the short term, people have to make adjustments and figure out what works for them. Not everyone is going to be comfortable with the different scenarios. They will just have to be patient.”
Get a deeper understanding about the tax implications on real estate with CPA Canada’s Protect your clients from CRA issues with real estate HST/GST guide or for tips on setting yourself up for retirement take the Managing finances in retirement session and read the procrastinator’s guide to retirement: How to retire in 10 years or less handbook.