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Are baby boomers breaking the real estate market? | Rylie's Review

Rylie Cook -

An article by the National Post entitled "Aging in Place: How Baby Boomers are breaking Canada's real estate market" that came out earlier this year made the argument that the Baby Boomer generation (those born between 1946-1964) are creating a bottleneck in supply for housing in Canada & thus are responsible for the current housing crisis we are experiencing.

I would highly recommend you go & read the original article after this as there are some very interesting stats and topics presented.

To summarize the article as best as possible:

  • Real-estate wealthy Boomers are to blame for yet again disrupting markets.
  • Traditionally, seniors sell their family homes and downsize or move into retirement communities
  • More than 20 per cent of Canada’s population will be 65 within the next five years however many are still working as they are healthier than previous generations
  • Many aren't ready to move into retirement communities or nursing homes
  • COVID-19 pandemic has exacerbated this problem in Canada as we witnessed the tragedy that occurred in some of Canada’s long-term care facilities where more than 50% of the deaths from COVID occurred
  • As a result, many older adults of wary of that future where they would be living in isolation as facilities put a halt to visits and residents typically had to stay put in their rooms
  • Those who would typically be ready to downsize are increasingly delaying the process since they don't want to move into long-term care facilities & can also experience appreciation on the value of their homes since the market is doing relatively well
  • Boomers are deciding to renovate their homes and/or hire private help inside their own property.
  • Many are able to do this as they have accrued equity in the value of their homes over the years which essentially allows them to pay for all of these extra services/necessities for aging in place
  • Rise in reverse mortgages has amounted to over $5 billion country-wide in recent years, the largest amount ever
  • There are currently fewer properties listed for sale in Canada than at any point on record & provinces like Ontario, Alberta and Manitoba have the lowest housing stock per capita.
  • This is creating a bottleneck in supply for first-time buyers and young families

While it's easy to point the blame at one particular generation for the current housing problems we are experiencing, there are various factors that have led us to where we are right now.

If we look at how the demographics of Canada have changed over the past 10 years, it becomes clear that we have a rapidly aging population.

In 2012, almost 1 in 7 Canadians were a senior.

By 2030, that number will change to 1 in 4 Canadians.

This works out to over 9.5 million people.

On top of this, the average life expectancy is expected to rise for both men & women by 2036 meaning that we will have a larger senior population that is living longer than ever.

The Government of Canada has been well aware of this fact for quite a while and has introduced measures to help the country transition towards assisting these seniors age-in-place as much as possible.

In 2011, $1.4 billion of combined investment went to helping 184,000 households in need for seniors & those with disabilities.

In 2013, the Economic Action Plan allocated $1.25 billion over 5 years for the Canada Mortgage and Housing Corporation's (CMHC) Affordable Housing Centre which has helped build 25,000 affordable housing units since 2006 with nearly 11,000 of those being for seniors.

There are also an increasing amount of products & services available that allow seniors to age in place with home retrofits like chair lifts, wheelchair ramps, elevators, safety handles + more.

As of 2016, 93% of seniors lived in a private dwelling and when polled, they were the least likely segment of the population to move (4.7% for 75+ years vs. 13% for general population).

The question that comes to mind when looking at all of this is "why don't they just move into retirement homes/communities as they get older?"

While there are the factors we mentioned above (high COVID rates, isolation in rooms, etc.), the real reason we see such little movement within this segment of the population is that there just aren't enough viable accommodations that are attractive to this demographic right now.

So how do we fix this issue?

Traditional retirement homes & communities have little appeal since many view this as a loss of their independence however there are successful examples we can look at from around the world that do offer the housing, social & medical networks that these aging populations need.

Some of these examples include:

In California, there has been a big reform to the residential zoning code which would allow homeowners in single-family zoning districts to convert their dwellings into duplexes or subdivide an existing lot into two lots to build duplexes on each, resulting in four dwellings in the place of one existing single-family unit.

This could allow for micro senior communities to form which would be able to provide a sense of independence & freedom while also providing the structure needed to age gracefully.

More locally, we have the opportunity to utilize new structures like laneway homes or garden suites to help build in dwellings that could be used by an aging family member or alternatively by their caretaker should they need someone to live in with them full-time.

By creating more unique living options like this, we can help relieve some stress from the housing market for both buyers & renters as more inventory will become available.

So back to the initial question of this article.

Are baby boomers breaking the real estate market?

In short, yes.

By having an older population that is living longer & not moving as often, this has created a chokehold on the fairly limited amount of housing inventory that we currently have available.

Is it their fault?

Kind of, but not totally.

I say this because historically there hasn't been much demand for senior-specific alternative home options in Canada as the population size didn't really necessitate it.

Only now are real estate development companies starting to realize the potential profits from building senior-specific projects, so we'll likely start to see more of these builds happen in the next 5-10 years as demand grows even further.

This could be further incentivized by government rebates for developers to create more attractive housing options for seniors at all price points.

By attacking this problem on multiple fronts, we can help take the edge off of the current housing crisis & ensure that our seniors have reliable housing options to age gracefully in.

What do you think the next 5, 10 & 20 years could look like for our real estate market as this demographic shifts its living preference from retirement communities to independent living?

Let me know in the comments section below!

Rylie C.