To get some understanding of just how high house prices have risen in Toronto, I cite my grandparents’ place in Etobicoke. My grandfather died in 1961, my grandmother in 1966. Their three-bedroom bungalow with a self-contained basement apartment sold in 1967 for about $25,000. Today, the same house, with no additions, would come on the market for $1 million and might even attract multiple bids. What else has risen forty-fold in the intervening almost 50 years? Nothing I can think of.
Certainly not incomes. When I graduated from university in 1967, my starting annual salary was $6,000. Humanities grads now get around $55,000. If the ratio were the same as in 1967, my grandparents’ house should cost $220,000 today. A case of beer was $5, now it’s $40, up eight times. Not even heavily taxed cigarettes, then about 50-cents a pack, now $10, up by a factor of twenty, can match house prices for sky rocketry.
I was recently doing some unrelated research and learned that the average mortgage in the mid-1960s was $33,000 and the average family income was about half that for a two-to-one ratio. Today, the average Canadian family is carrying mortgage debt of $190,000 and the average household income is around $65,000, a worse-off three-to-one ratio in the intervening years.
Low mortgage rates pushed up prices recently, to be sure, but there were many years in the last 50 when rates were high and prices still soared. The real question is this: how does anyone afford a first house these days? Even a dump of a place in Toronto costs $600,000. Still, there are many people buying those dumps for teardowns where construction costs can add another $600,000 to $1 million. In the ongoing debate about income inequality, housing trumps them all.