This reference is no longer applicable, he asserts Bruce SileryCredit Canada Managing Director.
Housing costs have skyrocketed everywhere. So individuals need to consider their own situation and decide how best to spend limited resources.
The Canada Mortgage and Housing Corporation (CMHC) began using this rule in 1986.
The 30% threshold remains a useful benchmark for consistently measuring housing affordability in Canada and other parts of the world, including the United States and Australia. Al said CMHC in a letter.
However, the company introduced the concept of housing hardship in 2020 to realize that for some families, spending less than 30% of their income on housing is not enough to cover all their basic needs.
In Vancouver, a single person needs a salary of $9,000 per month, or $108,000 per year, to pay for a one-bedroom apartment and keep those expenses at 30% of pre-tax income.
However, according to Statistics Canada, the median income for people over the age of 15 is $62,250. While not everyone needs or wants to rent a one-bedroom apartment, it does give an idea of the gap.
According to financial experts such as Ann Arbor, director of strategic partnerships and education at Credit Counseling Associationyou must abandon the 30% rule.
It’s a really tough number and it’s been around for a while, to be honest. […] In today’s era of inflation and skyrocketing housing costs, this isn’t always achievable.
Ann Arbor explains that the 30% rule was once the 25% rule when I first started studying economics. And the manager believes that this rule can be revised upwards.
She advises people to assess the needs and obligations of their families.
It’s easy to focus on one number, but you need to look at everything in balance […] We all have different needs. We all have different priorities and commitments.
Take a roommate or 2H job
Some families, for example, might spend more on groceries, while for others, it’s paying off student loans that dig into the budget. Ann Arbor explains that organizations such as Credit Counseling Association It can help assess family budgets.
Steve BridgeVancouver financial planner Money Coaches Canadaagrees with Ann Arbor, but believes the 30% rule remains a good goal to achieve.
He also advises families to prioritize and evaluate where to cut spending, such as going to restaurants. He acknowledges that expenses such as rent are not flexible Steve Bridgealthough it is possible to cut costs by finding a flatmate or to earn more money by getting a second job.
with information from Maryse Zeidler
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