GTA families spend over 110 per cent of income on mortgages

Ontario families earning a median income now spend more than 50 per cent of their after-tax earnings on monthly mortgage payments, and more than 110 per cent if they reside in the Greater Toronto Area

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Ontario families earning a median income now spend more than 50 per cent of their after-tax earnings on monthly mortgage payments, and more than 110 per cent if they reside in the Greater Toronto Area.

According to a new report from economic think tank the Fraser Institute, monthly mortgage payments range between 50.4 per cent (Ottawa-Gatineau) and 110.2 per cent (Toronto) of the local median after-tax family income when purchasing a typical house.

“There is a perception that housing outside of the GTA is still somewhat affordable, but that’s not true. Even in cities like Windsor and Kingston, buying a typical home would require a family earning the local median income to spend more than half of its after-tax earnings on mortgage payments,” said the report’s co-author, senior policy analyst Austin Thompson, on Monday.

Additionally, the study found mortgage affordability has significantly deteriorated since 2014, when the share of median after-tax family income needed for the mortgage payment on a typical home ranged from 21.1 per cent (Windsor) to 56 per cent (Toronto).

Over that time period, house prices have skyrocketed across the province while Ontario worker salaries have largely remained stagnant.

“Housing affordability is a function of both home prices and incomes, and as wages and incomes have flatlined across Ontario in recent years, the housing unaffordability crisis has worsened,” said study co-author Steven Globerman.

Meanwhile, the cost of a typical home in British Columbia will require local median-income families to spend more than 60 per cent of their after-tax earnings to keep up with monthly mortgage payments.

That figure is true across the province’s six largest cities, with Vancouver reaching over 110 per cent. Meanwhile, Vancouver’s rate was only 73.9 per cent a decade earlier.

“In order to make housing more affordable for British Columbian families, policymakers should focus on increasing wages and incomes as part of the solution,” said Globerman.

In Atlantic Canada, mortgage payments required to buy a typical home varied between 27.2 per cent (Fredericton, NB) and 52 per cent (Halifax) for a median-earning family.

“Halifax has experienced a sharp decline in housing affordability that has put ordinary homes beyond the reach of many families. For a Halifax family earning the local median income, a mortgage payment on a typical home now costs more than half of their after-tax earnings,” said Thompson.

These monthly payments don’t include the 20 per cent down payment on the initial purchase, which in 2014, cost roughly the equivalent of 14.1 months of median after-tax family income as an average across all cities.

However, by 2023, it rose to 22 months, an increase of 56 per cent, while mortgage payments also climbed from 29.9 per cent to 56.6 per cent.

“By 2023, no Canadian city had typical homes on the market that were affordable for families earning the local median after-tax income, absent an unusually large downpayment or external financial support,” reads the report.

“Rent affordability also declined in nearly every city: median all-unit rent rose from 19.8 per cent to 23.5 per cent of median after-tax family income between 2014 and 2023 (on average across cities)—an increase of 3.7 percentage points.”