"I’m worried about being priced out of my apartment"

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Name: Sally Young Age: 50 Location: Toronto The expense: Rent The numbers: $1,408 for a one-bedroom apartment with a view in east Toronto’s Danforth neighbourhood I’ve been in the same rental building at Broadview and Danforth for the last 15 years. When I moved in, I was paying $895 a month for a small one-bedroom and when I ended my lease for that apartment, I was paying $1,046. Then, I switched apartments within the same building; I went into a larger one bedroom with a much better view in November 2015; I started at $1,295. Since I’ve lived here, we’ve had two above-guideline increases [AGIs]. I don’t understand the process, but some tenants are arbitrarily picked, and for some tenants, it doesn’t affect them. The first time, I was fortunate enough that it didn’t affect me. This go around, I am one of the apartments that is part of the AGI. On November 1, my rent went up to $1,408. I really tried to understand what the process was about that and why, but I was never able to get an answer. It’s incredibly unfair. And there are tenants in building who have been hit twice.

Is owning a condo better than renting an apartment?

In 2006, my dad passed away and I got a little bit of an inheritance. I thought, “Oh wow, this sort of opens up my options. Maybe I can look at a condo.” And I did actually connect with a realtor and I did look at condos, but I didn’t follow through with it. I’m really glad I didn’t, because I feel that I would be chained to the condo and maintenance fees, and I wouldn’t be able to do the things that I really enjoy doing, like travel. And if something happens in the future, I feel like you could muddle through that if you’ve got a partner—and a second income. Not that it wouldn’t be stressful. But I just thought, “Okay, I can see my future. I think I’m going to be single.” I felt it was a big gamble for me to take on ownership of a property not knowing what the future holds. It’s different strokes for different folks, but I don’t regret not purchasing.

Affording rent in a pricey market

I love my apartment, I love the location. It’s my home. But, I also feel that I can’t afford to move even if I wanted to, because I know that I’m not going to get a similarly sized department in as good a location for the same price. I’d be paying $2,000 a month.

“Could I be priced out of my current apartment?”

That worry is ever-present. There’s that theory about how 30% of your income should go to rent. Well, I think I’m nudging closer to 50%. I was just going to say I’m not stressed, but if I’m always thinking about it, I’d say that’s stress, right? Every time I pay my rent, I’m thinking, “This is only ever going to go up.” My salary is not going to go up at the same percentage. At some point, there’s going to be a disconnect. I mean, right now I’m earning a very good salary, but I’m realistic enough to know that nothing is forever. Will I still be in this job in five years’ time? Probably not. But I can’t afford to move. So, what gives? I’m 50. My friends roll their eyes when I say this, but realistically, I should be thinking about retirement. I don’t want to live anywhere else. I choose to live in Toronto. I like city life—I certainly don’t see myself out in the suburbs or the country. So, if I choose to stay in my apartment, what else do I have to sacrifice and what happens when I retire? What happens when my pension doesn’t cover my rent—just rent, not hydro, not Rogers [services], not anything else. What do people do? I don’t know the answer.

Advice on renting vs. buying from a financial planner

“I am dealing with clients who are on both ends of the spectrum,” says Kelly Ho, a Certified Financial Planner and partner at DLD Financial Group Ltd. in Vancouver. “And what I mean by that is, I have clients who are currently making decent money, who are in their 30s and 40s and are renting and would like to buy, but their choice is either saving for a down payment or paying rent.” In either case, Ho’s approach is to helping those clients decide which choice is right for them, financially speaking, is to hammer out the numbers—and not just for a week or two. She digs into clients’ fixed expenses, their discretionary spending and even their risk of illness. “We [may have been] counting on one’s ability to be able to earn x amount for x number of years to meet a particular goal. But that’s a huge risk, especially for those who are single, right? You have no one else to fall back on if something happens to you,” she says. Ho recommends finding out what your employer offers to cover those risks. “What does their long-term disability plan look like? Do they offer critical illness or life insurance? And, if not, is that something we should factor into your personal plan?” Ho also says Young might benefit from being less rigid about her plans for retirement. “A lot of my clients are okay with moving in retirement,” she notes. When asked why they live where they are now, many will respond, “It’s because my work is here. This is where the job market is. This is where I need to be.” However, when they’re ready to move on from their careers, they’ll often say, “I’m open to moving to a cheaper place so that I can have a more fruitful retirement.” RELATED ARTICLES:

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Michael B Chew says:

June 7, 2020 at 1:03 pm

Rents could drop significantly if short-term landlords (think AirBNB) are forced to either sell or find long-term tenants in YVR and GTA this fall when mortgage deferrals end.

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Amanda Cuff says:

June 8, 2020 at 3:18 pm

If someone is a long-term renter in a big city, they always run the risk of the cost living such as rent and purchasing costs growing faster in pace than the increase in salaries. Governments encourage economic growth by increasing population growth to increase demand for goods (ex. housing) and the tax base. Unfortunately, housing supply has not been able to keep up with the growth in population. Long-term trends in major economic centres has always been an increase in housing costs over time. The best way to protect yourself is to purchase property once you are able and can afford to. If you purchased something at the age of 30 on a 25 year mortgage, it could be reasonably paid off and you are mortgage free by 55. The key is always getting something you can afford. But a lot of people would rather think in the present as opposed to considering long-term positions.

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Dane Praed says:

July 11, 2021 at 6:29 pm

Sally’s question was an excellent one and I have to say that I’m rather disappointed by the response. I’ve been reading MoneySense off and on for years and my memory of past examples is that they’re usually much more detailed and focussed on the questioner’s specific situation eg. Sally clearly states she loves life in Toronto and plans to stay and that she doesn’t necessarily see herself with the same employer in five years.

Personally, I would suggest two things. First, read The Wealthy Renter by Canadian writer Alex Avery as it definitely gave me food for thought. Second, take the examples you gather there, combine them with all of your personal financial information (take the time to get a rock-solid understanding of your budget and spending) and then meet with a “fee-only” financial planner. (MoneySense will have lots of articles on how to find a good one) Have them crunch the numbers for various scenarios and see what comes out.

Also, my understanding is that there should be laws about rent increases there so that situation also needs to be seriously researched. It may be that you have a dodgy landlord and will need to get that dealt with by some sort of outside body or you may be forced to move in order to stabilize your future rent increases. (I have two friends in Toronto who have both had excellent experiences with landlords so they’re definitely out there)

You are absolutely the right age to be thinking about life in retirement so begin reading all that you can and start listening to the various podcasts that are out there eg. The Retirement Wisdom Podcast. Everyone is different but a common theme I hear over and over is that the most important things in retirement are proximity to your social/family network and continuing to have a sense of purpose.

If your life really is in Toronto ie. the people you want to spend time with and the activities you see yourself continuing to do, you need to do your best to find out what it will take to stay there. Unfortunately, not many of us can “have it all” so you may need to face some tough compromises e.g. reducing your travel budget or working (even part-time) longer than you’d planned etc.

Finally, if you haven’t done so already, check out all the various resources out there that explore personal finances and happiness psychology. I, for one have been convinced that we need far less money than think to really enjoy life.

Good luck!

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