Starter homes used to have a very well-defined place on the housing market. Also known as entry-level homes, these properties were smaller dwellings, hovering around $200,000.
Nowadays, they increasingly seem to defy definition. On today’s highly heterogeneous housing market, a starter home has come to mean only that: The home that starts a first-time buyer’s homeownership journey. Whether they’re small or sprawling, less than $200,000 or more than $700,000, it’s the market that dictates the definition of the starter home.
So, to level the field, we considered starter homes to be valued at half the city’s benchmark price. With this price point in mind, we looked at renter household income in Canada’s 50 most populous cities to see where renters could switch to homeownership (considering that the monthly mortgage should not represent more than 30% of a renter household income and assuming a 20% down payment with a loan based on a 5.75%, 25-year fixed-rate mortgage).
Here are some highlights:
- Renters living in 36 of Canada’s 50 largest cities can’t afford a starter home in their city: They earn up to 60% less than what they would need to become home owners.
- In 12 Ontario and 2 British Columbia cities (Toronto, ON and Vancouver, BC among them), renters earn 42% to 59% less than the amount required to buy a starter home.
- Renters in only 14 cities earn 100% or more than what they would need to afford an entry-level home.
- Adding fuel to the fire, starter home inventory is virtually zero in 11 of these cities, with 26 more cities displaying shares of starter homes below 10%.
- Renters and aspiring buyers in 13 cities are a bit more spoiled for choice: Starter homes here represent at least 10% of the market, with shares going as far up as 17% and 18% in Vaughan, ON; Regina, SK and Markham, ON.
Starter homes used to be synonymous with affordable homes. Not anymore. Given how expensive the cheaper homes have become, renters and first-time buyers can only do one thing: Carefully look at home prices, incomes and mortgage rates to decide if they can buy a home in their city or not. And, judging by the latest numbers, renters in the majority of Canada’s largest cities are very far from fulfilling their homeownership dreams.
Renters in 5 Ontario Cities Make Less Than Half the Income They Would Need to Buy a Starter Home
- Renters in Richmond Hill, Oakville, Markham, and Vaughan earn an average of $70,000, but they would need around $160,000 and even close to $170,000 to afford a starter home in their city. Burlington renters earn even less, although starter homes there aren’t much cheaper.
- In the 14 least affordable cities, renters earn 42% to 59% less than what they would need to afford a starter home.
- With only one exception, starter home prices in these 14 least affordable cities are higher than $500,000, with three cities even crossing the $700,000 threshold.
- Ontario cities absolutely dominate the list of cities where renters can’t afford a starter home.
Starter homes come in all shapes and sizes, and now they run the gamut in terms of price as well. Although an entry-level home used to be synonymous with a home that costs around $200,000, this money wouldn’t even buy a room in a starter home in the 14 cities that are the least affordable for renters who want to switch to homeownership.
But home prices are just the first part of the equation. Renter household incomes also vary greatly from city to city, and sometimes they make the difference between being able to buy a home or being stuck deep in unaffordable territory.
For example, starter home prices are very similar in Windsor, ON and Calgary, AB. But while the renter household income in Windsor is $40,241, in Calgary it’s close to $69,000. This means that, while Calgary renters make 5% more than what they would need to comfortably afford a mortgage, Windsor renters earn 48% less than the amount necessary to buy a starter home.
But, aside from the 14 cities where the situation is most dire for aspiring homebuyers, in 10 more cities renters fall short by 30% to 40%. Being so far away from achieving their homeownership dream is a nightmare, but earning 80% or even 90% of the income needed to afford a home is the real Gordian knot: Not knowing whether to make the jump to homeownership or not keeps renters in a tense, frozen decisional space — their very own housing limbo.
In 14 Cities, Renters Earn More Than the Income Needed to Buy a Starter Home
- In 14 of the 50 largest cities, the renter household income is 2% to 52% higher than the minimum income needed to comfortably afford a starter home.
- Renters in Edmonton, AB and St. John’s, NL are the best positioned to buy a starter home: They earn 52% and 50% above the minimum income needed.
- The secret? In the majority of these cities, starter homes cost less than $200,000.
Renter household income in Edmonton, AB is around $70,000 and the price of a starter home hovers around $185,000. Assuming a 20% down payment and a 5-year fixed-rate mortgage with an interest rate of 5.75%, these numbers mean that Edmonton renters are uniquely positioned to make the transition to homeownership: They earn $24,000, or 52% more than the minimum income needed to buy an entry-level home in the city.
Homebuyers in the 13 remaining cities on this list may not be as lucky as Edmonton home seekers, but they are much luckier than the majority of renters in Canada’s largest cities. What’s more, a case can be made that Longueuil, QC could be included in this category, as well: Renters here make $59,342, which is only $99, or 0.2% less than what they need to be able to comfortably afford a starter home.
Incomes play an important part. However, the lower home prices in these cities are the main reason renters can not only dream about homeownership, but actually take steps toward fulfilling it.
In 10 of the 14 cities on the list, starter homes cost less than $200,000. This isn’t affordable just for today’s standards, it’s affordable even in the “traditional” sense of the word: Starter homes used to be defined as homes that don’t cross this price threshold. Therefore, the fact that these cities still have starter homes with this price tag is a true affordability miracle.
Where the Starter Homes Are: Only 13 of the 50 Largest Cities Have Shares of Starter Homes Higher Than 10%
- Of those 13 cities, only five meet all three criteria for affordability: In Regina, SK; Calgary, AB; Edmonton, AB; Saskatoon, SK; and Winnipeg, MB, renters have the right income, starter homes have the right price and the market has the highest share of starter homes.
- The remaining 37 large cities have progressively smaller shares of entry-level homes, with 11 of them having virtually zero homes that would be affordable for renters.
- A total of only 10 of the 50 cities in the study have starter home prices under $200,000, but not all of them have many homes currently on the market around that price point.
Despite all the talk about incomes and home prices and the current definition of a starter home, in the end, it’s the actual share of starter homes on the market that brings the affordability puzzle together. It doesn’t matter if renters have the right incomes and home prices are low: Home seekers also need some options to choose from.
And they might just be able to do that in 13 large cities. At 18%, Markham, ON and Regina, SK have the highest shares of starter homes on the market. Vaughan, ON follows suit with 17%, while Richmond Hill, ON; Calgary, AB; and Edmonton, AB all have shares of around 15%.
But, while Markham, ON; Vaughan, ON; Richmond Hill, ON; and Oakville, ON are highly unaffordable for renters, homebuyers from Regina, SK; Calgary, AB; Edmonton, AB; Saskatoon, SK; and Winnipeg, MB are much more fortunate.
Although these shares are not as high as prospective homebuyers might like, they nevertheless are the highest of the 50 cities included in the analysis.
And they may be especially appealing to the renters and aspiring homebuyers from the 11 cities where starter homes seem to be non-existent.
At the time the data was gathered, Ajax, ON and Cambridge, ON had no starter homes for sale. Although Barrie, ON and St. Catharines, ON each had two listings with the right price tag, it amounted to less than 1% of all the homes for sale in the city.
And the situation is not much rosier for renters in the other nine cities on this list: With fewer than 10 starter homes for sale, these markets have a very limited supply of entry-level homes for renters looking to become owners.
The starter home’s new and simplified definition is “the cheapest home in town.” However, this simplified definition does nothing to simplify matters for renters and first-time buyers. The change in definition can’t mask the painful reality: Even starter homes — which should represent the epitome of affordability — are increasingly becoming anything but.
Below is all of the data used in the study. Use the filters to rank the 50 largest Canadian cities based on the variable that interests you, be it starter home prices, renter income, income needed to afford an entry-level home, or share of starter homes.
| City | Province | Starter Home Price | Starter Home Down Payment (20%) | Loan Amount | Renter Household Income | Yearly Payment | Min Yearly Income Needed | Difference Income vs Needed Income | Household Income vs Income Needed | Share of Starter Home Listings |
|---|---|---|---|---|---|---|---|---|---|---|
| Toronto | ON | $564,400 | $112,880 | $451,520 | $70,422 | $38,904 | $129,678 | -$59,257 | -46% | 9% |
| Montreal | QC | $279,820 | $55,964 | $223,856 | $59,342 | $20,186 | $67,288 | -$7,946 | -12% | 2% |
| Calgary | AB | $275,400 | $55,080 | $220,320 | $68,795 | $19,602 | $65,339 | $3,456 | 5% | 15% |
| Ottawa | ON | $311,150 | $62,230 | $248,920 | $60,785 | $23,604 | $78,681 | -$17,896 | -23% | 4% |
| Edmonton | AB | $185,500 | $37,100 | $148,400 | $70,573 | $13,945 | $46,483 | $24,090 | 52% | 15% |
| Winnipeg | MB | $168,150 | $33,630 | $134,520 | $54,007 | $13,197 | $43,989 | $10,018 | 23% | 11% |
| Mississauga | ON | $536,950 | $107,390 | $429,560 | $70,422 | $38,135 | $127,118 | -$56,696 | -45% | 2% |
| Vancouver | BC | $585,350 | $117,070 | $468,280 | $73,791 | $37,850 | $126,168 | -$52,377 | -42% | 4% |
| Brampton | ON | $537,950 | $107,590 | $430,360 | $70,422 | $39,015 | $130,051 | -$59,629 | -46% | 2% |
| Hamilton | ON | $375,961 | $75,192 | $300,769 | $59,726 | $28,637 | $95,455 | -$35,729 | -37% | 2% |
| Surrey | BC | $507,161 | $101,432 | $405,729 | $73,791 | $32,974 | $109,912 | -$36,121 | -33% | 10% |
| QC City | QC | $159,629 | $31,926 | $127,703 | $52,273 | $12,229 | $40,763 | $11,509 | 28% | 3% |
| Halifax | NS | $248,450 | $49,690 | $198,760 | $56,631 | $18,654 | $62,180 | -$5,549 | -9% | 4% |
| Laval | QC | $240,010 | $48,002 | $192,008 | $59,342 | $17,510 | $58,367 | $975 | 2% | 1% |
| London | ON | $310,000 | $62,000 | $248,000 | $56,443 | $24,380 | $81,268 | -$24,825 | -31% | 3% |
| Markham | ON | $705,350 | $141,070 | $564,280 | $70,422 | $48,399 | $161,329 | -$90,907 | -56% | 18% |
| Vaughan | ON | $689,550 | $137,910 | $551,640 | $70,422 | $47,603 | $158,677 | -$88,255 | -56% | 17% |
| Gatineau | QC | $217,935 | $43,587 | $174,348 | $58,914 | $16,261 | $54,205 | $4,709 | 9% | 2% |
| Saskatoon | SK | $187,800 | $37,560 | $150,240 | $56,156 | $14,324 | $47,746 | $8,410 | 18% | 13% |
| Kitchener | ON | $371,400 | $74,280 | $297,120 | $67,562 | $27,919 | $93,062 | -$25,499 | -27% | 4% |
| Longueuil | QC | $239,231 | $47,846 | $191,385 | $59,342 | $17,832 | $59,441 | -$99 | 0% | 1% |
| Burnaby | BC | $536,334 | $107,267 | $429,067 | $73,791 | $34,839 | $116,129 | -$42,338 | -36% | 3% |
| Windsor | ON | $278,350 | $55,670 | $222,680 | $40,241 | $23,221 | $77,404 | -$37,164 | -48% | 5% |
| Regina | SK | $155,600 | $31,120 | $124,480 | $57,304 | $12,268 | $40,894 | $16,411 | 40% | 18% |
| Oakville | ON | $721,850 | $144,370 | $577,480 | $70,422 | $50,132 | $167,106 | -$96,684 | -58% | 14% |
| Richmond | BC | $589,600 | $117,920 | $471,680 | $73,791 | $38,284 | $127,612 | -$53,821 | -42% | 8% |
| Richmond Hill | ON | $740,300 | $148,060 | $592,240 | $70,422 | $50,925 | $169,749 | -$99,327 | -59% | 15% |
| Burlington | ON | $538,900 | $107,780 | $431,120 | $59,726 | $38,117 | $127,057 | -$67,331 | -53% | 6% |
| Oshawa | ON | $429,800 | $85,960 | $343,840 | $67,880 | $32,905 | $109,683 | -$41,803 | -38% | 6% |
| Sherbrooke | QC | $169,545 | $33,909 | $135,636 | $45,631 | $13,059 | $43,528 | $2,103 | 5% | 1% |
| Greater Sudbury | ON | $231,000 | $46,200 | $184,800 | $54,961 | $18,874 | $62,913 | -$7,953 | -13% | 5% |
| Abbotsford | BC | $389,350 | $77,870 | $311,480 | $70,886 | $25,938 | $86,460 | -$15,574 | -18% | 10% |
| Lévis | QC | $164,750 | $32,950 | $131,800 | $52,273 | $12,416 | $41,386 | $10,886 | 26% | 2% |
| Coquitlam | BC | $538,950 | $107,790 | $431,160 | $73,791 | $35,230 | $117,435 | -$43,644 | -37% | 5% |
| Barrie | ON | $373,000 | $74,600 | $298,400 | $63,750 | $28,458 | $94,858 | -$31,108 | -33% | 0% |
| Saguenay | QC | $125,680 | $25,136 | $100,544 | $45,739 | $10,111 | $33,702 | $12,036 | 36% | 1% |
| Kelowna | BC | $405,960 | $81,192 | $324,768 | $69,703 | $27,198 | $90,660 | -$20,957 | -23% | 10% |
| Guelph | ON | $388,300 | $77,660 | $310,640 | $63,750 | $29,297 | $97,658 | -$33,908 | -35% | 1% |
| Trois-Rivières | QC | $133,459 | $26,692 | $106,767 | $45,953 | $10,732 | $35,775 | $10,178 | 28% | 2% |
| Whitby | ON | $542,500 | $108,500 | $434,000 | $67,880 | $40,237 | $134,123 | -$66,242 | -49% | 2% |
| Cambridge | ON | $373,150 | $74,630 | $298,520 | $67,562 | $28,385 | $94,618 | -$27,056 | -29% | 0% |
| St. Catharines | ON | $300,200 | $60,040 | $240,160 | $53,478 | $23,629 | $78,765 | -$25,287 | -32% | 0% |
| Milton | ON | $554,050 | $110,810 | $443,240 | $70,422 | $38,609 | $128,696 | -$58,275 | -45% | 1% |
| Langley | BC | $498,350 | $99,670 | $398,680 | $73,791 | $32,563 | $108,544 | -$34,754 | -32% | 14% |
| Kingston | ON | $262,550 | $52,510 | $210,040 | $58,985 | $20,781 | $69,268 | -$10,284 | -15% | 1% |
| Ajax | ON | $520,850 | $104,170 | $416,680 | $70,422 | $38,521 | $128,404 | -$57,983 | -45% | 0% |
| Waterloo | ON | $374,100 | $74,820 | $299,280 | $67,562 | $28,077 | $93,592 | -$26,029 | -28% | 3% |
| Terrebonne | QC | $229,971 | $45,994 | $183,977 | $59,342 | $17,024 | $56,746 | $2,596 | 5% | 3% |
| Saanich | BC | $425,700 | $85,140 | $340,560 | $68,628 | $28,472 | $94,905 | -$26,278 | -28% | 6% |
| St. John's | NL | $153,800 | $30,760 | $123,040 | $56,590 | $11,345 | $37,817 | $18,773 | 50% | 4% |
Methodology
- For this study, calculations were made based on the median value of starter homes in Canada’s 50 largest cities, which means there could be cheaper/more affordable options on the market.
- Starter homes were considered to be the homes valued at half the benchmark price in each of the 50 cities included in the analysis. Rather than a fixed price, we chose this method because it better reflects the differences between markets in terms of housing costs, incomes and housing options.
- We also looked at renter household incomes in the 50 largest cities, based on data from the Canada Mortgage and Housing Corporation, adjusted according to Statistics Canada figures.
- To calculate the income required to afford the monthly mortgage payments on the median-priced starter home, we considered that the monthly mortgage should not represent more than 30% of a renter household income, assuming a 20% down payment was already covered and the loan was made based on a 5.75%, 25-year fixed-rate mortgage.
- We also took into consideration property taxes, based on various local sources and insurance costs.
- We then compared renters’ actual household income to the income they would need in order to afford payments on a starter home in a given city.
Disclaimers:
- The assessed value used for calculating the property tax may be subject to various exemptions, depending on local/zonal policies.
- Insurance costs may differ, depending on home value, home condition etc.
Fair Use
We encourage and freely grant you permission to reuse, host, or repost the story in this article. When doing so, we only ask that you kindly attribute the authors by linking to Point2Homes.com or this page so that your readers can learn more about this project, the research behind it and its methodology.
