A few years ago I visited Brampton and met someone from the city. I was told housing was getting so expensive for newcomers that in many cases 2-3 families or more were living in the same house.
This story came to mind as I received a couple of emails from people criticizing my recent commentary on housing prices. In both cases they pointed to Ontario and said that rising house prices hadn’t restrained economic growth.
As I said in the column, I think it is dangerous to compare southern Ontario - particularly cities/towns in the orbit of Toronto - to New Brunswick.
But back to Brampton. I was curious to see if I could quantify what I was told.
First, definitions. A ‘household’ from Statistics Canada essentially means everyone living in a private dwelling while a ‘family’ indicates couple or lone-parent families. You can get the formal definitions here.
From the 2016 Census, twenty-five percent of all households in Brampton have five or more persons living in them compared to only four percent in Moncton. By contrast only 12% of Brampton Census families have five or more persons in them (5% in Moncton).
The average household in Brampton has 59% more people in it while the average Census family has only 18.5% more.
So it certainly seems like the Brampton thesis is credible.
Despite this 2.5 times as many owner households in Brampton spend over 30% of income on shelter compared to Moncton. The average cost of housing in Brampton was three times higher than Moncton in 2016. Likely the spread has increased since.
Oh, and by the way, the average dwelling in Moncton has nearly 50% more rooms per person than the average dwelling in Brampton. Pay more. Get less.
I’m not here to pick on Brampton. It’s a great city. Fast growing. Lots of opportunity.
The only other thing this morning relates to interest rates.
People are telling me not to worry too much about housing prices because interest rates are so low. A young family can finance a $300,000 home and have a mortgage payment about the same as a $200,000 home at more historical interest rates.
Sure. But that is a ticking time bomb.
If you took out a $300k mortgage at 2.3% (current) you would face a monthly payment of around $1,250. If the interest rate increases just to 5% your payment rises to $1,710 or a difference of $460 - or $5,510 per year.
In other words a young family would wipe $5,500 off their annual disposable income just from a rise interest rates.
So we can’t be cavalier with this housing crisis.