Student loan debt is the most significant barrier for graduates when purchasing homes, according to the Ontario Real Estate Association (OREA).
A study published Sept. 20, sponsored by the OREA, showed student loan debt diminished recent university graduates’ ability to purchase a home, prompting them to move back in with their parents.
For many Queen’s students, homeownership is on the backburner, according to student leader Rector Owen Crawford-Lem.
“I think homeownership for a lot of us is just something that seems very out of reach right now, especially as we’re just graduating and might not even be able to find an apartment to rent,” Rector Owen Crawford-Lem said in an interview with The Journal.
The OREA study polled 1,500 Ontario post-secondary graduates aged 20 to 44, and found 42 per cent of graduates are considering leaving the province to find more affordable housing, with 14 per cent still on the fence. On average, each graduate had $14,500 left in student loan debt, while almost 70 per cent agreed student loan debt is making it harder for them to afford a house in the future.
“Buying a home was identified as the primary delayed decision for graduates, indicating the significant impact these loans have on their long-term financial plans,” the Impact of student loan debt on homeownership in Ontario report stated.
The OREA study highlighted graduates are inclined to return home to live with their families after graduating than renting or purchasing a new home. The study surveyed the parents of post-secondary graduates, half of whom reported planning to stay in their family home instead of downsizing.
For Crawford-Lem, this doesn’t seem so bad.
“Even if you have a good paying job, sometimes it’s nice to just go back home and save some money until you figure out where you’re looking [to go] or what you’re actually looking for,” Crawford-Lem said.
According to the Queen’s 2022-2023 Enrolment Report, almost 80 per cent of first years attended high school in Ontario, meaning many post-graduates are able to live at home while working in Ontario.
For the OREA, however, this data presents a serious issue. Older generations are unable to downsize, the housing market is stunted, creating shortage of houses, limiting younger generations’ access to the market.
“We’re concerned that the Canadian dream is slipping further and further out of reach to young people across our province,” Tim Hudak, CEO of the OREA, said in an interview with The Journal.
Hudak attributed the lower rates of homeownership to a lack of new affordable housing infrastructure. Hudak fears the difficulty in purchasing a home may contribute to a brain drain, as educated graduates leave Ontario in search of an affordable home.
“Entrepreneurs and job creators are going to move to other provinces, or the United States to purchase a home, raise their families, and start their business,” Hudak said.
In the last provincial election held in 2022, the OREA successfully lobbied all four major political parties to incorporate their ideas on housing supply into their platforms.
The OREA submitted four recommendations to Queen’s Park addressing the housing affordability crisis for graduates, including increasing the repayment grace period for the Ontario Secondary Assistance Program (OSAP) from six months to one year and eliminating the accumulation of interest on all student loans, including those being repaid.
One idea proposed is the opportunity for students to turn their debt into home equity. As of April 2023, Canadians can now contribute $40,000 untaxed to a First Home Savings Account (FHSA), a product of OREA lobbying intended to help people save for homes.
Now, the OREA proposes contributions to a FHSA by those with student debt, should result in a matched amount of debt forgiven.
“If a student were to put $5,000 into [the FHSA], [they] would have $5,000 similarly relieved from her student debt, therefore turning debt into equity in a future home,” Hudak said.
In Crawford-Lem’s experience, students are more concerned with the quality and price of their rentals, while homeownership is on the backburner because it feels so inaccessible.
According to Hudak, students staying in rentals for longer isn’t a good thing. It lowers vacancy rates while hiking prices and saving to buy a home can be more beneficial for graduates in the long run.
“Not only is homeownership a proven return on investment as you age and head towards retirement, but it’s also the place of our most precious memories,” Hudak said. “Don’t give up. We think there’s some better solutions coming on the horizon.”
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