Co-ownership on the rise: How Canadians are responding to housing affordability challenges
While many people decide to co-own a home for cultural reasons or to help take care of elderly parents or young children, more Canadians are now turning to co-ownership as a means to combat housing in-affordability.
In 2023, 6% of Canadians said they co-own their home with someone other than a spouse or significant other, with two thirds (76%) of those saying their decision was motivated by affordability challenges, according to a Royal LePage survey.
For those between the ages of 25 and 34, a full 83% said their decision was driven by a lack of affordability.
Of those who currently co-own, 89% are co-owning with a family member, 7% co-own with friends and 8% are co-owning with someone who isn’t a friend or family member.
Nearly half of the respondents say they and their fellow co-owners live in the home together. Another 28% don’t cohabitate while 6% say the property is not used as a primary residence.
A tale of two brothers
British-Columbia-based mortgage broker Angela Calla of the Angela Calla Mortgage Team said she recently worked on a deal involving two brothers in Surrey who decided to purchase a home together.
The brothers were both single, in their mid-twenties and living with their parents while working in the trades. They wanted to move out, but rather than renting, they decided to purchase a home together so they could start building equity, Calla says.
They were each earning about $70,000 a year and could save about $2,500 per month while living with their parents. They ended up purchasing a condo worth $600,000 and made a 10% down payment, contributing $30,000 each.
“Now they were saving money monthly and they were also building equity,” says Calla.
To arrange this, they worked with a lawyer to outline the rules of their agreement, with one important item in their contract being that they can’t have partners living at the house, which could open the door to family law. While this was a small sacrifice, Calla says it was worth it to the brothers, who view this purchase as a stepping stone to being able to purchase their own homes in the future.
“They bought for less than they could be approved for because they know that they’re young and that the next stage of their life would mean that they get in relationships,” says Calla. “You definitely need to consult a lawyer and consider that the life stage that you’re in right now is not the life stage that you’re going to be in in a few years.”
Calla emphasizes that in all cases of co-ownership, it’s essential to meet with a lawyer to discuss the terms of the agreement and how conflicts will be handled should they arise.
“Be very crystal clear about having the discussions about the hard aspects of what can happen,” says Calla. “Speaking to a lawyer who is expert in that is going to be a good guiding force for you in terms of how you’re going to handle those situations when they come together.”
Corporate co-ownership programs on the rise
There has also been a rise of companies dedicated to offering co-ownership options for those wanting to get into the housing market, but who don’t have the means to do so on their own.
One such company is Toronto-based Ourboro, which co-invests up to $250,000 towards a buyer’s down payment, which in turn earns the company a share of the future value of the home.
Lorne Andrews, principal broker at DLC Expert Financial, said he has personally referred many of his clients to Ourboro.
He said one of the advantages of this option is that the homeowners get to live in the home alone and are responsible for the mortgage payments on their own. This helps them build equity and potentially a larger down payment for a better mortgage contract in the future.
“There are many people out there who could afford to qualify for the mortgage, but they don’t have a 20% down payment,” says Andrews. “This could be a great way for people to get involved a lot sooner and not that many people know about it.”
Ourboro requires buyers to have at least a 5% down payment and then they will contribute the remaining amount to get them up to a 20% down payment. Having an uninsured or “conventional” mortgage allows the buyers to get a longer amortization period that would be possible with an insured mortgage. It also allows them to save on default-insurance fees.
“We always recommend this as a stepping stone,” says Andrews. “Get into a home today, build equity, cash out, now go buy your home with the equity that you’ve built in this home over the first four or five years.”
Co-owning is a rising trend in an unaffordable market
Whether deciding to co-own a home with another person or company, co-ownership is quickly rising as an option for many to get a foothold in a housing market that is becoming increasingly unattainable.
“Different generations of families living under one roof is not a new phenomenon, but has been growing in popularity in recent years,” said Karen Yolevski, COO at Royal LePage.
“In a market beset by reduced home supply, escalating prices, tightened mortgage qualification requirements, and the highest borrowing rates in more than two decades, many buyers are having difficulties securing the property that they want,” she added. “By dividing the cost of a home between more people, Canadians can not only get their foot on the property ladder more easily, but also expand their home search to more desirable locations or larger properties that may not have been accessible with their budget alone.”