Charting a Course to a Brighter Future: Housing Affordability and Young People’s Major Life Decisions

This note is the second in a series on the economic opportunities and challenges facing youth in Canada. Our first report focused on the path being navigated by younger Canadians as they leave home to pursue an education and embark on their careers. We have followed it up with a note that looks at the difficulties being experienced by young adults as they look to put down roots in their communities. A third and final note will focus on the circumstance that will come to define their generation over the come decades.

• While many Canadians are concerned about their financial prospects, that anxiety is even more pronounced among youth in Canada. With economic uncertainty running high and a possible recession around the corner, these concerns are particularly acute today.
• Youth in Canada have less financial security than older Canadians. Youth employment is typically less resilient to changes in the economic cycle than employment among older workers, which means recessions affect their earnings more directly. Young people also tend to allocate a greater share of their consumption to necessities. They generally have much higher levels of non-mortgage debt relative to their incomes as well, be it in the form of student debt or other consumer debt.
• Housing is much less affordable for today’s youth than it was for prior generations. Young Canadians are less likely to own a home, as the long-time erosion of affordability in Canada accelerated during the pandemic and has yet to recover. Unfortunately, renting for extended periods tends to have material negative implications for long-term savings and wealth accumulation. And if youth do own a home, they typically have a larger mortgage than their older neighbours, particularly relative to their income, leaving them more at the mercy of rising interest rates. As such, governments need to get serious about increasing the housing supply.
• Together, these crosscurrents compound the challenges faced by younger Canadians, with knock-on consequences for family planning and other major life decisions. Despite doing all the right things to start their futures off on the right foot, young adults in Canada are more likely than ever to live with a parent. It’s also taking them longer to form long-term relationships, which is leaving youth more likely to live alone than ever before. Not surprisingly, this has led to a sustained increase in the age at which women have their first child, and women are having fewer children than they say they would like to have. The push for universal subsidized childcare has gone a long way to improve the affordability of having children and to allow young people to have the families they want. But more needs to be done, including providing more flexible work arrangements to support parents.
• Some have tried to pin the blame on youth for their own financial challenges, but that’s misguided. On average, young people in Canada are highly financially literate when compared to past generations and their international peers. They’re also more likely to pursue a postsecondary education, thereby increasing their likelihood of having a higher income. Life has just become increasingly unaffordable for Canadian youth, particularly around housing. But more can be done to support financial literacy starting at a young age by including it in the mathematics curriculum at all levels. Raising awareness and providing information after graduation would also support lifelong learning.
• As Desjardins Economic Studies has discussed in a variety of analyses—most notably in a note by our Chief Economist Jimmy Jean—the solution to the long-term erosion of Canadian housing affordability is to increase supply. But Canada’s youth need more than just policy announcements and prayers; they need urgent action. Unfortunately, while governments at all levels have recognized that the housing shortage in Canada has reached crisis levels, there’s been more talk than action. This is one of the most pressing issues of our time, and governments of all levels need to take it seriously if young Canadians are going to achieve the same level of financial security as Canadians who came before them.