Making home ownership a reality for Ottawa’s millennials and first-time buyers
If you, or a family member, are a first-time homebuyer, chances are you’re concerned about the high cost of homes in Ottawa. Frankly, if it weren’t for today’s historically low interest rates, almost everybody would be concerned about the price of homes in Ottawa.
On Oct. 27, 2014, Ottawans go to the polls to elect a mayor and a city council. Now is the time for voters to have a say about making home ownership a reality for younger adults and first time homebuyers.
Most baby boomers paid, on average, about $150,000 for a new single family home in 1989. Today, their children, the millennials, are spending about $440,000 for a new home. That’s almost three times more in just one generation! Even when you take the rate of inflation into account, millennials are still paying almost 70 per cent more for their first new home than their parents did.
Salary increases are certainly not keeping pace, so it’s no surprise that parents are now being asked to chip in to help their adult children get on the first rung of the homeownership ladder. Most parents want to help their children if they can, but does it make sense to base Ottawa’s housing and land use policies on the generosity of family members?
So, here are three things our elected officials can do to make housing more affordable in Ottawa.
1. Expand the supply of land available for new homes
Ottawa’s population is growing. The City of Ottawa’s Official plan forecasts that Ottawa will need approximately 145,000 new homes over the next 20 years. That comes to 7,250 new homes per year, every year. Where will these new homes be built?
The City of Ottawa controls the supply of land for new home building. When the supply of land for new homes is held steady while Ottawa’s population continues to grow, the cost of land will rise. When the cost of land for new homes rises, so does the cost of all homes and property.
The City’s current approach to land use is to promote growth within the Greenbelt and to restrict the expansion of the urban boundary. This is often referred to as intensification, and it’s been good for Ottawa revitalizing older neighbourhoods like Westboro and Hintonburg. It’s added a dynamism and vibrancy to those areas and has helped attract people and businesses. Intensification has been good for existing home owners too by driving up the value of their homes.
However, intensification has not been so good for millennials and other first-time homebuyers. They’ve been priced out of the market in Ottawa’s older neighbourhoods, and so are looking to buy new homes outside the downtown core. That means more land has to become available in communities beyond the Greenbelt. While downtown condos work for many, they don’t work for families with young children. The City of Ottawa needs to balance its focus on intensification with housing affordability.
2. Adopt a balanced approach to new homebuyer taxes
On average, the buyer of a new single-family home in one of Ottawa’s suburbs pays about $30,000 in taxes to the City of Ottawa. These taxes are called Development Charges and are intended to cover the cost of infrastructure needed to support a home. At a time when increases in our municipal property taxes have been kept to the rate of inflation, new homebuyer taxes are increasing by 20% from 2013 to 2014.
At the present time, these taxes account for 6 to 7 per cent of the cost of a new home in Ottawa. These continuous increases are putting home ownership out of reach for many first-time buyers. You can see the infographic on the cost components of a new home above.
3. Streamline the permitting and approvals process for new homes
In Ottawa it used to take about two years for a homebuilder to go from the purchase of land to the sale of a home. This process now takes about five years putting significant upward pressure on finance costs.
An improved and streamlined approvals process for new homes will have a direct and positive impact in making a new home in Ottawa more affordable.
What can you do this election?
Our elected officials can help make home ownership dreams come true for Ottawa’s millennials and first-time home buyers. They can expand the supply of land for new homes, they can reduce new homebuyer taxes and they can simplify the permitting and approvals process for new home building.
Over the next six weeks, you will be asked for your vote by candidates for city council and the mayoralty. Take the opportunity to talk to them and ask them what they would do for housing affordability in Ottawa.