It’s time to start thinking differently about homeownership

In case you’ve been living under a rock, the times they are a changin’. I suppose that was always true, but for homeownership and the housing market in particular, it looks like we might be perceiving things in an entirely new way as the 21st century marches inexorably onwards.

Paul Smetanin, CEO of the Canadian Centre for Economic Analysis, says we’re about to experience a sea change in the way we think about renting. Cities like Sydney and Vienna prove that “you don’t have to own your own home in order to have a great home.”

Historically, likely owing to our abundance of available land, we have tended to look at homeownership as ultimately desirable and renting as a stop-gap. But homeownership may have peaked in the GTA at 70%, he said, according to TheStar.com. “In Canada, unlike other countries, [renting] is typically associated with the affordable housing end of the spectrum. In Vienna, 60 percent of that city is rental — beautifully constructed buildings and it’s market rental, so people aren’t house-poor,” he said to a housing supply and price panel put on by the Ryerson University City Building Institute and the Urban Land Institute on Monday.

Unlike in Toronto, where we rent lease-to-lease if not month-to-month, often in fear of being evicted if the homeowner changes their plans, Smetanin pointed out that in Vienna, tenants have lifetime tenure provided they pay the rent.

Obviously, I’m a proponent of homeownership, particularly for those who aren’t great about saving or savvy about investing in other ways. It’s a built-in retirement plan — provided you hang onto it long enough, real estate doesn’t fail. I still think homeownership is a great way to go.

But especially for first-time buyers and those who want to live near their downtown jobs, homeownership these days can be a pipe dream. Those same potential buyers, however, could afford a generous monthly rent, and such a shift in our thinking may mean that renting a primary residence frees us up to invest in real estate in other ways.

One option would be to look ahead and purchase your intended retirement home now. Not all of us want to stay in the city when we don’t have to work anymore, so looking north to communities like Collingwood’s Blue Mountain or Barrie’s Horseshoe Valley could be an attractive option.

With prices that are still substantially lower than the GTA’s but close enough to enjoy faster appreciation than something in the genuine middle of the Canadian nowhere, a home in a resort community offers a terrific weekend retreat, rental potential, and a good investment option over the long-term.

Purchasing in other markets that are still reasonable is another consideration. Many of us want to be here in the GTA while we’re working and the kids are in school, but long to spend our days on the beaches of Cape Breton or in the Montreal neighbourhood where we grew up. The average price of a home in Montreal is about half that of Toronto, and even less in Newfoundland, Nova Scotia and PEI.  While it may seem impractical to invest in a property you might only use on weekends or for a few weeks in the summer, RateHub.ca’s calculator tells me that a $165,000 mortgage (yes, you can buy a home in PEI for $180,000, which gives you a mortgage of $165,888 with 10% down and $3,888 going to mortgage insurance) amortized over 20 years at 2.5% leaves me with a monthly mortgage payment of $889.

Many of us have car payments that approach that, and we need those cars to commute because we can’t afford to live near work. Now, adjust your thinking and imagine living carless in the downtown core (or with one car instead of two) in a rental unit, and putting your car payment plus the cost of gas into a beautiful three-bedroom home with a sea view in the Maritimes.

Or buy a unit in a university town like Kingston or Guelph, rent it out, and let your investment pay for itself while it appreciates for a few years. Or go sharesies with a few friends on a vacation property in Jasper, for that matter. The prices may be high, but not if you’ve got a few partners to split costs.

I don’t think we’re ever going to see the day when Canadians don’t highly value homeownership. In my business, I hope not! But maybe it is time we started looking at renting as more than a last-ditch way to keep a roof over our heads, and as a key component in our homebuying strategy.