Will we witness the rise of the middle class?

Friends of mine bought a four-bedroom, two-storey detached home on a nice residential street in Scarborough in the early 1970s for $38,000.

It’s not a fancy house. Spacious enough, but far from large. I’d guess it’s about 1,800 square feet. It has a decent lot for the suburbs that were east Scarborough then, and the neighbourhood is just OK — largely residential but some less-than-savoury elements abound on the nearby main drag. There is no basement. The bedrooms aren’t very big. There’s a half-bath downstairs and a full bath upstairs. The kitchen is galley-style, the dining room windows are barely at grade. It has a walk-out to their lovingly planted yard. He worked behind the scenes at a TV station. She stayed home and raised two kids and a series of good-sized dogs. They weren’t splash-out sort of people, and now they’re financially comfortable in the same house 15 years into his retirement.

In other words, a perfectly nice, once-aspirational family home for a perfectly fine family. There’s a very similar house listed on Realtor.ca as I write this, barely a block away from it — at $599,000.

Now think about the couples you know today, young couples who are ready to buy a house and eager to start making babies. Not a fancy house, and not too many babies. Just someplace with a good school to lay down some roots, and enough to keep two kids in hockey equipment. Maybe even a dog.

Unless their parents give them money, most of the young couples I know these days are looking at condos, if they can afford to buy at all. There’s no question of one of them staying home with the kids, and they fret about what they’re going to do even for a one-year maternity leave during which EI will kick in. Many will cut their parental leaves short to get back to their paychecks.

How many of them can afford to buy a $600,000 house? No wonder we’re talking about the disappearing middle class.

Restoring the middle class was a focus of last week’s federal budget. Although warning that it will necessitate additional debt (surprise!) the ruling Liberals announced they would scrap Harper’s changes to EI, reducing the 910-hour minimum for eligibility to the regional labour market threshold, and reducing the two-week wait to one week.

The retirement age will stay at 65 instead of going up to 67 in 2023 as the last government vowed. The budget also included their previously announced 1.5% tax cut for middle-income-bracket earners and a four-point increase for those making more than $200,000.

Although in many respects I lean to the right, it’s hard to argue against a minor tax increase for those whose income actually does let them buy $600,000 houses without much forethought. The EI changes (or non-changes) will be expensive, estimated at $1.25 billion a year, but with unemployment predicted to rise as oil prices decline, I’m not heartless. We have enough oil-dependent communities in Canada and folk gotta eat. I understand the retirement age thing too, as I hurtle towards it myself.

They seem like small measures once you scale them down to the individual even though they’re costly on a national level. Whatever your political proclivities, it’s hard to sound reasonable saying 65-year-olds haven’t earned a retirement, people whose livelihoods are at stake through no fault of their own don’t deserve a break on benefits they already paid for, and wealthy people shouldn’t pay another 4%. Maybe we will see the middle class rise again; although it will take a lot more than this, it’s a start.

Part of what it will take is more affordable housing, and that’s a complex problem with multi-layered possible solutions. Also in the budget was a half-million-dollar pledge to Statistics Canada to develop methods for gathering reliable intel on the impact of foreign homebuyers on our housing markets. It’s a first step too, and one of few budget inclusions that will affect the real estate sector directly.

Renters got a potential boon with a five-year Affordable Rental Housing Innovation Fund investment of $208.3 million over five years, to be administered by CMHC. Its aim is to develop up to 4,000 new affordable rental units. The fund will give priority to developers building mixed-use projects, which would make a welcome and long overdue change in the purpose-built rental market.

Loans will be available to developers in the earliest stages of project development, which should incentivize them to start making rental properties again instead of concentrating solely on the condo market.

The budget also allows the same amount over the next two years for the construction, repair and renovation of affordable seniors’ housing. Whether the aid will come in the form of tax credits to the seniors themselves or as seed money for the institutions that develop the housing wasn’t so clear.

Some of the costs might be defrayed by the Liberals’ plan to crack down on tax evasion and loopholes that may impact real estate investors who have thus far slipped into a gray area between capital gains and business income. Consider yourself warned.

And while the Feds are taking a stab at mitigating the factors that make it nearly impossible for those we once called middle class to buy homes, the City is adding another cost to homeownership.

On April 1 (appropriately, April Fools’ Day), Toronto will impose an admin fee of $75 plus HST to cover the cost of collecting municipal land transfer taxes on all title transfers.

Honestly, where is your imagination? Got a shortfall? Tap the housing market.

We can’t keep lamenting the high cost of homeownership while piling on yet another fee, which is not even a terribly cleverly disguised tax on a tax. That HST is a tax on a fee for collecting a tax. Needless to say, industry stakeholders weren’t consulted when the tax’s tax’s tax recently slipped through city council quietly, following an initial announcement in January.

Oh, and first-time buyers? Those “middle class” folk who can barely afford a home? They pay the tax’s tax and its tax even though they get the tax rebated.

It’s a good thing we haven’t seen any recent tax hikes to alcohol.