Good luck, parents and grandparents hoping to get a pat on the back for those tall tales about the challenges you endured growing up. Now it’s millennials and Gen Z receiving all the sympathy for the hurdles they go up against.

Fair or not, growing sentiment holds that the long slog through snow drifts that grandpa contended with to get to grade school pales in comparison to the current realities younger generations face, in a world waving farewell to affordability and leaving homeownership out of reach for many. 

About 50% of university students graduate with debt

One barrier that tends to scoot under the radar is student loan debt. According to Statistics Canada, roughly half of university students graduate with debt. This can impact long-term financial plans, so much so that many young people cite it as their primary reason for being unable to get into the housing market. 

It’s been dubbed “gateway debt,” as it can hamstring financial independence, leading to social inequity and postponing important life choices.

“Entering the workforce with debt from other sources compounds housing affordability issues”

Recent government measures to reduce interest accumulation and otherwise make student loan debt more manageable need to be stepped up, housing activists insist. They reason that student loan debt is more than just a financial burden. For many young buyers, it can be the biggest obstacle not just to homeownership but also to meeting other major milestones, such as moving out of the family home and having children.

Says Craig Munn, vice president of communications for Greater Vancouver Realtors: “Saving the large sums necessary to buy your first home is a significant issue for all young adults. While the investment in education and skills-building strengthens individuals’ earning potential long term, entering the workforce with debt from other sources unfortunately compounds the housing affordability issues that young people face today.”

Debt delaying significant adult landmarks — like buying a home

Kate Phifer graduated with $40,000 of student debt from Greater Vancouver’s Capilano University in 2016. She’s now a student success facilitator there. The debt is behind her, having been paid off relatively quickly, over four years. But Phifer believes that student debt ended up delaying key adult landmarks for herself and her wife (a paramedic), who haven’t yet been able to afford to start a family or buy a home. 

“Without debt that picture would be different,” contends Phifer.

Many of her friends who graduated without debt — or whose parents paid off their loans for them — own homes and have children now, notes Phifer, although a significant number have had to move to smaller, more affordable communities to do so. 

Hannah Moffet, 29, who graduated from Ontario’s Trent University seven years ago, has whittled down her student debt by half, to $16,000. She lives in a rented condominium with long-time boyfriend Denny and is working as an administrative assistant at Toronto General Hospital. Her bank statement continues to take a heavy hit monthly when her Ontario Student Assistance Program (OSAP) repayment is withdrawn. 

“It’s definitely slowed me down” in terms of saving for a house or marriage, acknowledges Moffet. “Rent is high in Toronto too. I don’t think I’ll ever be able to afford a house here.”

But she reasons that at least she doesn’t have a bank loan or line of credit along with the student debt, like some of her friends.

42% of Ontario graduates consider leaving due to the affordability crisis

A poll around the impact of student loan debt on home ownership, released last fall by the Ontario Real Estate Association (OREA), found that with the weight of loan debt making it harder to save for a home and qualify for a mortgage, 42 per cent of Ontario graduates are considering leaving the province due to the affordability crisis.

British Columbia is experiencing a comparable dilemma, with many graduates opting to move to less pricey provinces like Alberta. “Millennial buyers are facing some stiff headwinds,” notes Randy Ryalls, a Royal LePage broker from B.C.

With young grads looking to other provinces for affordable housing and “taking their skills with them,” OREA president Rick Kedzior is among those who feel that homeownership policies aimed at easing the squeeze of student loan debt need to hit harder. “By championing policies that can help break down barriers to homeownership and foster a supportive environment for education financing, we can help alleviate the pressures of student loan debt and empower the next generation of homeowners.” 

OREA’s recommendations for the government

Among the recommendations OREA put on the table for government action as a result of its recent survey are:

• eliminating the accumulation of interest on all provincial student loans (federal interest is already eliminated Canada-wide after initially being introduced as a relief measure during the pandemic)
• increasing the initial repayment grace period, so that new graduates have additional time to find employment and save up before starting repayments
• allowing graduates to alleviate a portion of their student loan when they add funds into the federal First Home Savings Account (FHSA)

Younger generation more willing to compromise

One result of the current challenging economic picture, according to recent RBC findings, is that young first-time homebuyers are becoming increasingly willing to accept trade-offs that older generations wouldn’t, displaying greater flexibility around location preferences and living in smaller spaces. 

And despite debt and out-of-sight prices, a recent survey by Wahi, a digital real estate platform, found that Canadians aged 18 to 34 have the strongest homebuying intentions this year of any demographic. Results suggest that young aspiring home buyers are willing “to make sacrifices, including spending less, working longer hours, or taking on a side hustle,” to overcome obstacles and get on the property ladder, notes Wahi CEO Benjy Katchen. 

“They’re willing to make lifestyle and work changes to realize their dreams.”