April 14, 2024

The Queens County Citizen

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Housing: Economic analysts feel that the 30% rule is no longer feasible

Housing: Economic analysts feel that the 30% rule is no longer feasible

This reference no longer applies, confirm Bruce CeleryManaging Director of Credit Canada. Housing costs have risen dramatically everywhere. Individuals must therefore examine their particular situation and decide how best to spend limited resources.

The Canada Mortgage and Housing Corporation (CMHC) began using this rule in 1986. The 30% threshold continues to be a useful benchmark for consistently measuring housing affordability in Canada and other parts of the world, including the United States and Australia. Said CMHC In an email.

But the company introduced the concept of housing hardship in 2020 to recognize that some households spend less than 30% of their income on housing, which is insufficient to meet their basic needs.

In Vancouver, a person needs a salary of $9,000 a month or $108,000 a year to buy a one-bedroom apartment and keep this cost within 30% of pre-tax income.

However, according to Statistics Canada, the median income for people aged 15 and over is $62,250. While not everyone needs or rents a one-bedroom apartment, this gives some idea of ​​the gap.

According to financial experts like Anne Arbor, director of strategic partnerships and education Credit Counseling Society30% rule should be abandoned. It’s a really tough number and has been for a while to be honest. […] In today’s era of inflation and skyrocketing housing costs, this is not always achievable.

Anne Arbor explains that the 30% rule was once the 25% rule when she began studying economics; And the director feels that this rule can be revised upwards.

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She advises people to assess their household needs and responsibilities. It’s easy to focus on a single number, but you have to look at everything in balance […] We all have different needs. We all have different priorities and responsibilities.

Get a roommate or 2e a job

Some families, for example, may spend more on groceries, while for others it’s student loan payments that dig into the budget. Organizations like Anne Arbor explains Credit Counseling Society Helps estimate household budgets.

Steve BridgeFinancial Planner in Vancouver Money Coaches CanadaAnne agrees with Arbor, but thinks the 30% rule is a good goal to aim for.

He, too, advises households to set priorities and assess where to cut costs, such as going out to restaurants. Expenses like rent are not ideal, admits Steve BridgeFinding a roommate can help you cut costs or earn more money by working a second job.

With information from Maryse Zeidler

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