In my last post I objected to Canada as still being a land of opportunities because of the increasingly prohibitive cost of living. This month I’m trying to explain how this affects everyday working Canadians.
Let me say up front, that these are my thoughts without trying to put a spiritual spin on them, although I will be inviting sustainable solutions that may contain spiritual elements. Moreover, these reflections are based on a Western standard of living and are not suggesting that Canada isn’t a good place to be if compared to parts of the globe that are suffering greater poverty and want. Such comparison wouldn’t be warranted.
According to a September 2013 Global National newscast, Canadian debt on non-mortgage loans had gone up by 3.47%; credit card debt by 3.53%; installment loans by 5.56% and auto loans had gone up by 3.38%.
In January 2014 one of CBC The Bottom Line’s panelists, Jim Stanford (Economist with UNIFOR), stated that housing is very high, relative to the income and debt levels (by international standards).
Mortgage loans, on the other hand have skyrocketed, as Chris Brown of CBC, reported on January 15 that “people are taking out gargantuan mortgages on ever more expensive homes . . . borrowers are only an interest hike or two away from disaster”; a sobering condition.
The Canadian government gets concerned about people being house-poor, when they spend more than 30% of their total income on housing costs. According to Statistics Canada, 1 in 4 homeowners and Canadian households (3.3 million Canadians) fall into that category and more are expected to join their ranks. For all its concerns, I don’t see the government introducing any measures to curb the growing prices of real estate. In most European countries, where one can’t profit by flipping houses, real estate prices and rentals are capped. A home is a necessity and many families tend to spend their lifetime in the same house. Capital is increased by other kinds of investments, such as a rental property for instance.
Do these increased mortgages only affect lower income earners? Not really. When a young professional couple was interviewed on their experience, they stated that they had been looking for several months to buy their own home. They came to the conclusion that, despite the fact that they both had good incomes, they were not able to afford buying a home and they would have to continue renting.
Income Inequality Gap
I’m not going to bore you by reams of statistics; if you’re interested in how Canadians feel that the income gap is creating a less fair Canada, the link below will take you to a York University/ Toronto Star January 2014 survey.
The reality is that a majority of Canadians feel the squeeze of an ever-widening income gap, where 1% of the wealthy have enjoyed a 75% wage increase over the last decade, while average Canadians income has remained stagnant at 5-6%.
When I visited my family in Canada in the summer of 2012 and 2013, I was shocked at the jump in prices. In just one year, food prices, housing, petrol and other goods had increased once again. While increases are not abnormal, the proportion of the increases isn’t.
Earnings, for instance, have not kept up with the sharp growth in basic living expenses. This has a significant impact on citizens living on a fixed income, who can barely manage to survive as they see rent payments taking 50% or more of that income and other basic necessities swallowing up the rest.
With California having gone through its worst drought it will severely affect grocery prices in Canada. Even California’s present deluge doesn’t help reverse the parched land conditions – according to news reports. Since Canada depends for a large part on California’s produce, we are already warned that food prices will go up dramatically. It’ll be interesting to watch whether these prices will go down when a better year provides an abundance of produce. Unfortunately the inevitable price increases will only add a greater financial burden on the already strapped family purse.
Just so you don’t think this is my personal rant, let me give you a few comparisons with Germany, my present home away from home.
As one of the wealthiest European countries, Germany offers a reasonable cost of living. Food and shelter are affordable. Okay, let’s break it down. If I compare Munich to Vancouver, there will be less difference in house prices or rentals. Although Munich ranks 90 compared to Vancouver 60 in the 2012 world city rankings by cost of living. If, however, one lives in a smaller town or village20 to 30 minutes from the city, housing prices and goods are markedly less.
I live about 20 kilometers, 30 minutes from Ulm, in a small village. The next larger city would be Stuttgart, 90 kilometers away. My rent for an 800Sq feet 2 bedroom rooftop apartment is around $500 + $100 for utilities. When I return to Canada, I hope to live in Oliver, BC or surrounding area, 400+ kilometers or 5 hours drive from Vancouver. The closest city with amenities would be Penticton, 45 kilometers or about 50 minutes away. Rental prices I’ve been following are around $700 for a one-bedroom apartment, $800 to $1,000+ for two bedrooms + utilities, and an overall smaller living surface. Considering the distance to a noticeably larger center, these rentals are quite high compared to what I pay here.
An average bungalow 146053/Sq. ft. 3 bedroom in Oliver costs around $400,000; in a comparable town in my neighbourhood the cost is about $100,000 less or better. (Two-storey homes, couldn’t find ranchers or bungalows in my area and vice-versa in Oliver). Neither includes property taxes.
My grocery bill is less than half of what I used to spend in Canada, and I expect it will be extravagant by the time I return to BC.
Insurances and medical fees are lower than in Canada as are fees for alternative health practitioners (quite popular in Germany). For medical interventions and specialists the waiting time is minimal. Three months seems to be the longest. Quality of health care is considered one of the best in the world.
Health insurance premiums – which are compulsory by law – are prohibitive when one is not part of the German health system and has to take out a private medical insurance. For people over 60, the lowest is around $800 per month. For regular health insurance, the employer pays part while the employee pays a percentage. Pension contributions also, except that an employee, who chooses to continue working after 65, may stop paying pension contributions, while the employer still pays his share into the pension plan.
These are only a handful of comparisons of course but you get the idea.
The present cost of living situation in Canada is real and a burden for many families. For moms who would love to stay at home to care for their household, unless they belong to the 1% high income earning family, that option is quite out of the question.
With rising costs, and it doesn’t look like this will change any time soon, sustainable solutions need to be looked at.
Two families were in the news last month. Faced with problems finding adequate rentals and the impossibility of owning a home, they put their heads together to figure out a solution. They decided to unite their purchasing power and acquired an $800,000 home, which would have been impossible on their own. With their children, they are eight people under one roof. One family has the top floor, while one has the main floor. The kitchen and living room is shared, the meals are eaten together.
Sacrifices? Absolutely! They agreed that there was give and take and that the arrangement required its sacrifices but they were quick to point out that the benefits were many. Aside from the shared expenses, they had become a mini community, where the children enjoyed each other’s company and the adults had a meaningful lifestyle.
There are probably other families, couples and singles that have done the same; necessity brings creativity.
In East Vancouver, which is largely seen as the poorer area of Vancouver, one church community bought several multi-storey homes and started to invite lesser-privileged people into their homes. Each home became a micro community where several singles joined together or joined a family. Some yards were turned into vegetable gardens, to decrease the overall cost of food. Those who participated into the housing project have shared stories of the benefits of reaching out into the community, and making shelter affordable by contributing to each other’s lives. They also explain the difficulties that arise in living with several people under one roof, yet these difficulties are overcome through communication and listening. The economic benefits and the many celebrations (birthdays, Christmas, etc.) spent in community far outweigh the disadvantages of sharing living space. These living communities have had and still have a great impact in East Vancouver. The Christian testimony, by church members living out their faith in everyday life, is seen as genuine and serves as example of what following Christ really means in practical ways.
Supporting local farmers is also crucial. Many of my friends already do, and it would be good to promote this at every opportunity. Locally grown produce alone is not sufficient and we may have to return to what our grandparents did, buying produce that is in season, hence more affordable.
I’d be very curious to hear from you; your experiences and also any sustainable suggestions you may have for average Canadians, for single parent homes and seniors. Any comments that speak directly to the situation faced by Canadians mentioned in my previous post and today.
In an upcoming post I’ll be re-blogging the cost of living of expatriate Canadians who have chosen to retire in more affordable locations.