Generations

At twenty I left home. At 21 Dorothy declined my marriage proposal. At 23 she accepted. We rented an urban hovel then, at 26, built a small house on a dirt-cheap snowbelt treeless rural lot with a mortgage at 12.5%. Happy.

Change is the only constant, and today society has a whole new patina.

In 1971 – as I tried hard to impress her – 91% of the people my age (early 20s) did not live with their parents or in a multigenerational setting. By 2021, fully 25% were still at home in the US and in Canada the number had jumped to 35%. Over the last twenty years adult children shacking with parents have grown older. Close to half are now aged 25 to 34, according to StatsCan.

It’s a profound shift. The financial implications are deep. Chief among them is the 30+-year drain on parents who may not stop supporting their offspring until well into their own retirement. Making it more consequential are the forgiveable loans made by the Bank of Mom so Junior can buy real estate. That usually comes out of parental home equity or from retirement savings, reducing net worth at the worst possible time – when employment income ends.

Why is this happening?

Lots of reasons, apparently. Kids spend a lot longer in university now, delaying independence and earned income. Mortgages may still be comparatively cheap (we could only dream of a 6% borrowing) but houses cost a bundle. Rents are high. The pandemic messed up everything, created seriously risk-averse young adults and stymied careers. Now there’s angst about a recession, even when we have more jobs openings than bodies to fill them.

Young adults increasingly choose staying home

Mostly, we have a crisis of expectations. The Millennials, for example, have lived their entire sentient lives thus far in a real estate bubble. Ingrained is the belief that owning property is the only route to building wealth, that the stock market’s a casino and debt is inevitable. Millions of young adults refuse to leave home and take on financial risk until they can buy real estate – which they expect their parents to partially finance or co-sign for.

As you know, this breeds generational conflict. Boomers are seen to be the beneficiaries of a time when houses were cheap (even if mortgages rates were triple). It’s why the zealots at Generation Squeeze, for example, what a surtax imposed on everyone owning a house with a million or more – assuming this will help wealth flow from the older to the younger. It all reinforces the cult of real estate which has led us to this point – houses people cannot afford, and the greatest pile of household debt in history, now resetting at a higher cost.

So what is Ottawa doing?

A few days ago the multigenerational home reno tax credit came into being, allowing a 15% write-off of construction costs up to $50,000 to build a suite. Ostensibly this is a for a family member who’s a senior, or disabled, but may quickly morph into something different. One use may be to assist parents in subdividing a home that their child never leaves.

Many cultures foster this kind of arrangement, of course. Parents, grandparents and adult children dwell contentedly in separate spaces or on different floors, sharing expenses and providing mutual support. So is the new federal tax credit an admission all of society should now be moving in that direction? Stay-at-home-4evah?

Yup. Seems so.

Politicians thus far have failed to address the root reasons real estate was financialized, then became out of reach. Building more houses at market price will change zip. The FHSA is intended to boost demand, which makes things worse. Banning wealthy non-resident buyers does nothing to help first-timers. Heaping on land transfer, property, vacancy, speculation, flipping and non-local taxes inevitably raises prices. We have so lost our way when a 2% increase in mortgage rates leads to societal meltdown.

Are we living in a time when our kids are punished and disadvantaged because of when they were born? Are they being denied the fundamental right to real estate?

Or have we birthed a generation of entitled spoon-fed wusses?

What’s in your basement?

About the picture: “This is my mother’s dog, Coco,” writes Travis. “She lives in Australia. Good-natured, except for when humans are talking on zoom calls and the jealousy sets in.”

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Have a beast to share with the pack? Send me a picture and some words, to ‘[email protected]’.  – Garth