Housing, Opinion

Reflections on the eradication of Canada’s middle class 

A recent article in the Capital Daily outlines how the housing crisis is eradicating Victoria’s middle class. 

Throughout British Columbia, the average rent and mortgage payments exceed what many people can pay. 

“What’s been happening over the last 10 years is that the share of homes bought by first-time buyers has been declining, and their market share has largely been taken over by investors,” said John Pasalis, president of Toronto-based Realosophy Realty, told CBC News.

He added that, contrary to what many believe, the lion’s share of the investors were domestic owners who purchased a second home as an investment. 

What does this mean to Canada’s ‘disappearing’ middle class?

A 2023 poll from pollara strategic insights found that ’39% of Canadians earning under $20k a year and 92% of those earning over $150k a year consider themselves middle class … Though most believe Canada’s middle class is shrinking, the percentage of Canadians who self-identify as middle class has stayed relatively consistent in recent years.’ In 2020, they made up 76% of the population. 

There appear to be two definitions of middle class in that poll. From a strictly financial perspective, middle class households appear to earn between $60,000 and $150,000, but there are other definitions. For example, a middle class person is said to own their home and a car (though they could still be paying for them) and has enough disposible income to eat out and go for vacations. 

Personally, I don’t know if I ever qualified to the definition of middle class in terms of taxable income, but only one of my three income streams was taxable. In addition to my earnings, I also received money from my parents and gleaned thousands of dollars from a series of real estate estate transactions that started with the house I purchased for $36,000 in 1986. I usually made a profit which was not taxable because we sold our principle residence and moved to a new location (which would then be renovated, after a few years, and sold.) None of those profits were taxable because they were our principle residences. We rode out the real estate wave and were not the only people to do this. 

Memories are tricky, but there may be more to the exodus of the Lower Mainland’s older families to more rural areas than real estate values. Some of us feel more at home here. 

The tight knit rural community where I grew up, during the 1950s, disappeared into the Lower Mainland’s urban sprawl decades ago. I remember Maple Ridge as a place where everyone, in my parents generation at least,  appeared to know each other and were the volunteer backbone of organizations like the Rotary, the Legion, Power Squadron, Boy Scouts etc. Add dashes of environmentalism and ‘hippies,’ and you could be talking about Cortes Island. 

Moving forward to the present, there are a number of things to consider. 

According to Statistics Canada, in 2020 the median after-tax income of Canadian households was $73,000. 

2020 was the baseline year for the last census. 

On Cortes Island, the median after-tax household income was $45.600. There were 260 one or two person households whose after tax income was between $60,000 and $150,000. They were the island’s ‘middle class,’ economically speaking. Another 40 households had higher incomes. A large proportion of our population is retired. Only 140 of the people who worked were able to do so for the full year. The other 390 either worked ‘part time,’ or for part of the year. 

Quadra is a wealthier island. The median after tax income for households on Quadra (and the rest of Area C) was $52,200. 805 households fit into the econoimic definition of middle class and 135 had larger incomes. Much like Cortes, there is a large retirement population on Quadra. Of the working population: 425 people were employed year round and another 765 worked part time.  

Once again, we are working with two definitions of middle class. Some people have invisble streams of income, but never-the-less own their own homes, cars and all the other specifications.   

Thanks in part to the real estate boom, roughly 60% of Canada’s population are expected to  receive an inheritance of at least $100,000. My kids will most likely be among them. The transition of wealth has already started and, unless the real estate market totally collapses, they should receive more than that.  

Forty percent of Canada’s population are not expected to receive a similar kickstart. Through no fault of their own, their chances of purchasing their own home are more limited. More of their energy is likely to be consumed by the struggle to survive and less will be available for the activities that could benefit the larger community.  

Real estate prices have grown to the point that people with $100,000 downpayments often find their choices limited. 

According to Paul Kershaw, a public policy professor at UBC, the problem is that we perceive our homes as financial assets rather than places to live. We need to be clear about our expectations from the housing market ‘and it has to start with: we don’t want these prices to rise any more.'”

Top image credit: Looking out the front woindow of a Cortes Island home – Photo by Amy Forest

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