Young families looking for a starter home in most Canadian cities today face far steeper odds than those in Vancouver, Victoria or Toronto just two decades ago, according to a new report from the University of Ottawa\u2019s Missing Middle Initiative (MMI).<\/p>\n
Average dual incomes for young households (ages 25 to 34) have risen by 76 per cent since 2004, but the average newly-built starter home price over 23 metropolitan areas has jumped 265 per cent, the report<\/a> says \u2014 far outpacing income growth even before adjusting for inflation.<\/p>\n Today, the price-to-median income ratio is higher in eight Canadian cities than it was in Vancouver \u2014 the most expensive in the country \u2014 in 2004.<\/p>\n The data underscore the reality that \u201c[t]he middle class will not be able to afford a family-sized starter home\u201d unless policymakers \u201cget serious about the cost of homebuilding,\u201d the report says.<\/p>\n If, hypothetically, the cost of building new homes were to stay the same, the MMI report notes it would take an average of around 25 years for incomes to reach a point where starter home affordability approaches the levels seen in 2004.<\/p>\n Housing affordability has been a dominant issue in Canada for years, with some in younger generations abandoning hope<\/a> of ownership. Governments at different levels have taken steps to address the issue, seeking to increase supply<\/a> and cut back red tape<\/a> \u2014 but economists warn the current situation is one in which \u201cprices are still too high to buy and not high enough to build.\u201d<\/a><\/p>\n The MMI report shows how far the balance between wages and home prices has tipped this century. In 2004, the median dual-earner income in most Canadian cities was between $50,000 and $70,000, with newly-built starter single-family or semi-detached homes priced at 4x that amount or less in all but Vancouver, Victoria and Toronto.<\/p>\n In Kingston, Ont., for example, a starter home was around $185,000 in 2004, about 3.1x the median dual-earner income of $59,200. A starter home in Vancouver was $365,000, or 6.8x the median dual-earner income of $53,500. In Sherbrooke, Que., starter homes were around $100,000, just 1.8x the median dual-earner income.<\/p>\n Today, the starter home price in Kingston is around $740,000, about 6.9x that city\u2019s 2025 median dual-earner income of $107,480 \u2014 meaning the price-to-income ratio has grown by around 120 per cent. In Sherbrooke, a starter home now costs $369,000, 3.3x the median dual-earner income of $111,500, or a price-to-income ratio rise of 80 per cent. In Vancouver, a starter home now costs around $1.7 million, 17.2x the median dual-earner income of $98,823 \u2014 a 152 per cent increase in the price-to-income ratio.<\/p>\n The report argues the imbalance predates the pandemic. In London, Ont., the price-to-income ratio more than doubled between 2004 and 2019, for example.<\/p>\n The findings suggest that restoring affordability may depend less on falling home prices than on lowering the cost of building the units. Without changes to land-use rules, development charges and construction standards, the report implies the gap between wages and new-home prices could remain a structural feature of Canada\u2019s housing market.<\/p>\n John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf<\/a>.<\/p>\n Download the Yahoo Finance app, available for Apple<\/a> and Android<\/a>.<\/p>\n