If you’re feeling frustrated, stressed out or simply drained when it comes to figuring out your long-term housing plans, you’re not alone. Housing affordability is creating a generation of long-term renters who are facing many barriers into traditional homeownership. 

If you’re a renter who’s struggling to get into the housing market, here’s how you could end up being stuck on the rental treadmill and what to do about it. 

You keep saving, but prices keep going up

The days of saving up for a couple of years for a down payment while renting, and then buying your first home are long gone. In fact, it takes the average first-time Canadian home buyer 24 years just to save up enough for the typical 20% down payment. What’s more? The longer you save, the more housing prices seem to increase. 

In fact, in 2021 Toronto posted the highest drop in housing affordability. The National Bank of Canada’s 2021 Housing Affordability monitor posted that housing affordability reached its worst point in 27 years. 

And while housing prices are rising, income growth is not following suit at the same rate. While home prices in Toronto rose by 16% in 2021, median household income only increased by 0.9%.

Additionally, many feel that the ‘Housing headache’ is shifting its way to the rental market. While rental rates in Toronto faced a decline during the onset of the COVID-19 pandemic in 2020, now in 2021 we are seeing them trending back up again. 

With prices rising at significantly greater rates than income growth, it’s no wonder that one of the biggest fears about homeownership among Canadians is not being able to get into the market and if you are among the lucky few, becoming house poor once you’re finally an owner. 

You’re unable to qualify for a mortgage

If you are able to save up enough for that 20% down payment, an additional barrier can be becoming approved for a mortgage.

When applying for a mortgage there are a number of factors that will be considered. A top consideration is a steady income, this creates a large barrier for those who are self-employed. As lenders often view you as a greater risk, you are less likely to be approved.

Qualifying for a mortgage presents an additional barrier for people who have recently immigrated to Canada. Because they are not able to transfer their credit report, they have to begin building credit again which can take years.  

Additionally, the 2021 RE/MAX Report found that the implementation of a higher threshold for the Mortgage Stress Test is a key barrier impacting personal housing affordability. 

So if you find yourself stuck on the rental treadmill, what can you do now? Here are a few options.

Try reducing rent cost

There are a few ways of reducing your renting costs that could help you save up quicker for a downpayment. Living with roommates can help feasibly cut costs, as you will be able to split your rental cost and fees such as utilities and furnishing. 

Another strategy is moving back in with your parents, while this may not be possible for many, it can cut costs significantly while you are trying to save.

Another popular method of reducing your rental cost is moving to a cheaper neighbourhood. Unfortunately this may involve longer commute times. 

Look into alternative housing options

Many Canadians are beginning to explore alternative housing options. One such option for someone who wants to get their foot in the door to the housing market is renting out a portion of their home. This can allow them to make passive income while paying off their mortgage. 

Look at innovative models

Not willing to compromise your independent lifestyle or location? Looking at new innovative models of homeownership could make sense for you. 

Rent-to-own models  give you the opportunity to rent for a certain period of time with the option to buy the property before the end of your lease. This allows you some more time to save before having to put down a downpayment. 

However, this model is not always a good deal if you do not end up buying at the end of your lease as you may lose most of the money you have put into it and you may be charged fees. Plus, you’ll still need to qualify for a mortgage. 

Co-equity models address both of the biggest barriers locking individuals out of the housing market. With Key’s co-equity model you can start owning a condo in downtown Toronto with an initial cost of just 2.5% of its value. Additionally, unlike rent-to-own models, you never have to qualify for a mortgage. See more on how rent-to-own models compare to Key’s co-equity model. 

The housing market is leaving more and more Canadians stuck on the rental treadmill. If you’re feeling locked out of the housing market it’s important to look into options that can help you. 

At Key, we’re breaking down traditional housing barriers by making homeownership more accessible for Canadians. Learn more about how Key can help make homeownership work for you.