Emily of Monsterlady’s Diary posted recently about what she might do if she had a million dollars to give away and it focused on making sure her family and herself could own their own homes. I have thought about this very issue quite a bit as I’ve aged, and pondered it some more this morning sitting on my deck with Finn and my coffee.
I think that one of the things that would bring me comfort as I ‘age out’ of society would be knowing that the generations following mine could have a fair chance to own a home. I think that is a bit of stretch given current conditions. But there are some things I’ll be watching for before my ashes are put in a jar somewhere.
Restoration of a middle class
There is no practical ‘middle class’ in this era, not like there was in the 1950s and 1960s. Back then, the super-rich paid a fair tax: somewhere around 60% of what they earned. This funded a lot of infrastructure and also made it possible to reduce the tax rate for those in the middle and lower classes.
There were also these things called ‘unions’. Unions had a lot of faults and I’m not a big fan of them in general, but one thing they did fairly well was make sure that the average worker made a living wage. We need more of that, as well as a strong minimum wage so that every worker has enough to sustain life.
We also need laws that prevent the difference between senior executive compensation and average worker pay from becoming too extreme. I think a SVP or CEO that makes hundreds of times what the average worker does shouldn’t. Right now they average 250 times their average employee’s wages: maybe fifty times is enough? If a CEO wants a raise, they should raise the salary of their workers. And note that I include stock and related equity in the executive’s compensation: saying they didn’t get a raise then taking a $50 million dollar stock grant is bullshit.
And on that note: if a super-rich person is compensated with stock or other equity instruments those should be taxed as salary. Not if an average Joe gets a couple thousand dollar bonus, but a person who measures their total income in tens of millions of dollars should absolutely be paying taxes on all wealth as it comes to them.
Difference between salary and house price
Right now the cost of an average house in Canada is over $700,000. The average annual salary is about $50,000: that means a house is about 14 times the annual salary. In 1960 an average house was about $20,000, and the average annual salary was about $6,000, meaning a house was about 3.3 times annual salary. This difference in multipliers identifies how extreme the challenge of purchasing a house has become.
Restoring a healthy middle class should help increase average salary, but the greater challenge is reducing the cost of housing. I am not sure what approaches would work best in this regard: having government subsidies for first homes could move the needle a bit, I guess. Maybe a special ‘first home savings’ tax shelter could be established e.g.: money set aside from salary in a special home owners tax account could be tax deductible. This could be funded by the increased taxes on the wealthy.
Regardless, I think more steps need to be taken to reduce the effective multiple between salary and home cost for first time home owners.
Conclusion
I am thankful that, thus far at least, my nieces and nephews have had some success at home ownership. I’d like to make sure that my younger family members and all of society have a good chance to own the place they live. That requires unravelling several decades of focus on making the rich even richer, and putting the focus back on the average citizen.
Thanks for featuring my post. I have a good paying job but I shouldn’t feel like having a place of my own is so far out of reach.
Your good post reminded me of something I wanted to post about, and I definitely appreciate that.
I want my grand-nieces and nephews to have a chance at home ownership. I know that, if I started today with the good salary I had at retirement, I couldn’t: that bothers me.
Wowwow, In our area, it’s roughly hard to even think about renting a house/apartment, let alone buying one.
This was taken from a google search I did just a few minutes ago.
The average home price in Pittsburgh, Pennsylvania is between $232,805 and $240,443, depending on the source
Anything under half a million sounds almost reasonable to me these days, Shadowz: obviously it isn’t really, but house prices are pretty crazy in most urban areas in Canada.
Where you live can make a huge difference, though. If you are able to live somewhere rural I suppose an average salary could get you a decent house: of course, it is usually necessary to live near where you work, and not many rural areas have good employment opportunities.
I really hope things change to make it easier for folks starting out to build up the kind of life they want and deserve.
Not really when our minimum wage for the entire state is still $7.25 an hour, unless you work in restaurants then it’s lower, Most places now start you out at around $12-15 an hour. Then taxes for everything. Privileged tax for working in other counties. Rentals are even worse for people as they are asking for unrealistic things 2x to 4x times the income even for rentals. Credit rating can be doable as its usually asking for about a 650 credit score, no criminal activity. But it’s the rental prices where they are literally roughly the same now as a home mortgage in our area. We live in the sub-suburbs , we’re an hour an half outside of Pittsburgh, and these new landlords bought up all the places are now charging anywhere between $1,000.00 a month to as high as $2,700.00 a month for rent because they want multiple people living in the homes so the rent is shared between house members, and instead they are making it harder for just couples with and without children to be able to afford anything to live in that isn’t owned by a slumlord.
Your idea is now a reality 🙂 The Canadian government introduced the First Home Savings Account (FHSA) in 2023 to help first-time homebuyers save for a down payment. Contributions are tax-deductible up to $8,000 per year, with a total limit of $40,000. Interest and investment income earned in the account are tax-free if used to purchase a first home.
However, it’s still challenging to secure my own place given the current situation, and I hope things improve soon too. Thank you for posting—it was healing to read.
I wasn’t aware of the FHSA program: thanks for posting about that! It is a helpful step at least here in Canada, but for folks who don’t have enough income (the whole ‘vanished middle class’ thing) it isn’t very effective.
I have some hope that tax and corporate law reform may start to happen if the appropriate governments get elected. And unions may start to make a come back. But it all seems to be a rather slow and fragile process: the influence of the very rich and large corporations on elections is far too strong. I have a few years left to watch for progress, so fingers crossed!