Steve McGuinness
Columnist

Shelter is our most basic human need, addressed by our housing market. Housing costs are the biggest budget expense in most households, spanning the generations.

Many millennials and Gen Xers still aspire to become new homeowners. Meanwhile, boomers are increasingly tapping into their home equity nest egg, as their retirement savings deplete more rapidly, coping with affordability challenges and more uncertain investment yields.

Our residential real estate market continues to slump. Despite recent Bank of Canada interest rate drops, the days of cutthroat home bidding wars are well behind us.

Single-family home prices in Ontario fell for the third consecutive month in April, although the month-over-month decline of 0.7 per cent was less than February to March’s decline (3.2 per cent) and January to February’s decline (2.4 per cent).

The average price of a single-family home in Ontario declined year-over-year from $950,800 in April 2024 to $901,200 last month, a 5.2 per cent drop. Listing numbers and the average days on the market before sale are both up.

Landlords are also renewing leases at lower rents. In the first quarter, Greater Toronto and Hamilton Area rents declined 2.2 per cent from a year ago. Even in downtown Toronto, the average cost of a one-bedroom apartment is down to $2,224 — nearly $400 below the record peak in October 2023.

Despite these recent drops, housing remains unaffordable to many. The ratio of the home price index to average household disposable income was 8.52 for the Niagara region in February.

This means it costs more than eight-and-a-half times a worker’s average annual earnings to afford to purchase an average home here. Fortunately, this is still 29 per cent lower than in Toronto and 11 per cent lower than in Hamilton.

Meanwhile, governments at all levels are proposing new solutions to deliver more affordable housing faster. The new Carney government has promised to double the annual pace of new homebuilding “on a scale not seen since the Second World War.”

The plan includes the creation of Build Canada Homes, a national agency to will develop affordable housing on public land and offer billions in low-cost financing to speed up construction.

The province is also looking to fast-track housing construction by exerting more control over municipalities. Queen’s Park will expand controversial minister’s zoning orders and standardize municipal development fees.

Municipalities use development fees to build infrastructure, such as sewers or roads, to support housing. Development charges will now be due at occupancy instead of upfront during the permitting process. The province believes these fees can be punitive and hurt the cash flow of homebuilders seeking to get shovels in the ground.

In upcoming columns, we will explore whether home ownership still makes sense as a key financial goal and under what conditions. We will also explain government tax incentives (like the home buyers’ plan and first home savings account) and the mortgage lending policies, promoted by Canada Mortgage and Housing Corporation, that can assist in certain circumstances.

In his Bay Street career, Steve McGuinness was a senior advisor to large financial institutions and is now retired in NOTL. Send your personal financial planning questions to him at smcgfinplan@gmail.com.