The rapidly increasing cost of housing in Metro Vancouver could have dire consequences for B.C.’s labour market, according to a recent study published by Vancity Credit Union.
Masses of millennials could be making a great exodus out of Vancouver in the near future if housing costs and wages stay on their projected trajectories, causing B.C. to face a potential labour crisis. This ‘brain drain’ is researched in Vancity’s May 2015 study Help Wanted: Salaries, Affordability and the Exodus of Labour from Metro Vancouver, which warns individiuals, businesses and governments that high quality labour is threatened by the increase in the cost of living and unaffordable housing prices.
“Contrary to popular belief,” says Vancity, “Millennials are just as likely to aspire to home ownership as previous generations.” In fact, 93 per cent of those born between 1980 and 2000 plan on owning a home in the future. But they may need to take their plans elsewhere if salaries continue to fall behind the cost of living.
Between 2001 and 2014, the cost of housing in Metro Vancouver increased by 63 per cent – and 211 per cent in the City of Vancouver – while salaries only rose 36.2 per cent. Even at today’s prices, much lower than the projected average cost of a detached home in 2030 ($2.1 million), the salary needed to maintain a typical mortgage in Vancouver for a $713,125 house is $78,088. Finding an occupation that pays enough will not get any easier.
If housing prices go at the pace projected by Vancity’s Downsizing the Canadian Dream: Homeownership Realities for Millennials and Beyond study, averaging $1.5 million for a detached home in Metro Vancouver by 2030, there will only be a handful of occupations in 2020 paying enough to live in Vancouver:
- Senior managers in financial, communications and other business services
- Senior managers in construction, transportation, production and utilities
- Engineering managers
- Specialist physicians
- Electrical and electronics engineers
Five years later, that number diminishes to three. Only senior managers and engineering managers will make enough to live in Metro Vancouver by 2025.
If the effects are not already obvious, Vancity predicts this lack of affordability will cause:
- An abundance of migration out of Vancouver causing a labor crisis
- Businesses to have to pay more to retain talent, causing an increase on the cost of doing business in Vancouver and passing over costs to consumers
- Individuals to move to more affordable housing options such as rentals or sharing living space with multiple households
- Individuals to forgo other expenses like RESP and RRSP contributions
But these repercussions are not just looming in the future; they are already happening. In fact, Vancouver suffered a net loss of 1,571 millennials in 2013, up from 770 in 2012. More and more young people are leaving for Alberta and other provinces where wages are higher.
Vancity makes several recommendations to governments, businesses and individuals to help curb this work force exodus, but shies clear of suggesting any real policy changes.
Recommendations for government:
- Inclusionary zoning to give developers the right to develop market housing only if they include a certain amount of non-market housing in the development. Inclusionary zoning differs from bonus density, which rewards developers with additional market-rate development density to develop market condos in exchange for below-market rate contributions they make to delivering affordable housing units (and/or other community amenities like libraries, childcare, public art, etc). Integrating below-market housing options into development rights helps to manage the land value.
- Rental housing tax incentives in order to make development of rental housing as competitive as market condominiums.
- Land lease renewals for the leases for affordable housing stock that exists on public lands owned by municipalities and other government agencies.
- Re-purposing public and community-owned land to deliver financially sustainable mixed-tenure and mixed-use developments that maximize affordable residential units
- Workforce housing inclusion to build large firms’ attraction package
- Provincial, regional and municipal governments need to work with their communities to create incentives that maximize the efficient use of existing housing stock to serve housing needs.
- Harmonize affordable housing strategies between municipalities and provincial government
Recommendations for businesses:
- Pay a living wage
- Offer flexible benefits especially for parents and transit users
- Relocate to higher density business area serviced by public transit
- Advocate for affordable housing
- Explore options for investing in affordable housing
Recommendations for individuals:
- Evaluate cost of renting versus buying
- Embrace multi-family living such as owning arrangements, housing co-operatives, co-housing and co-ownership
- Consider a smaller space
- Consider intergenerational community living