“I’m worried about being priced out of my apartment”

Name: Sally Young

Age: 50

Location: Toronto

The expense: Rent

The numbers: $1,408 for a one-bedroom apartment with a view in east Toronto’s Danforth neighbourhood

I’ve been in the same rental building at Broadview and Danforth for the last 15 years. When I moved in, I was paying $895 a month for a small one-bedroom and when I ended my lease for that apartment, I was paying $1,046. Then, I switched apartments within the same building; I went into a larger one bedroom with a much better view in November 2015; I started at $1,295.

Since I’ve lived here, we’ve had two above-guideline increases [AGIs]. I don’t understand the process, but some tenants are arbitrarily picked, and for some tenants, it doesn’t affect them. The first time, I was fortunate enough that it didn’t affect me. This go around, I am one of the apartments that is part of the AGI. On November 1, my rent went up to $1,408.

I really tried to understand what the process was about that and why, but I was never able to get an answer. It’s incredibly unfair. And there are tenants in building who have been hit twice. 

Is owning a condo better than renting an apartment?

In 2006, my dad passed away and I got a little bit of an inheritance. I thought, “Oh wow, this sort of opens up my options. Maybe I can look at a condo.” And I did actually connect with a realtor and I did look at condos, but I didn’t follow through with it. I’m really glad I didn’t, because I feel that I would be chained to the condo and maintenance fees, and I wouldn’t be able to do the things that I really enjoy doing, like travel. 

And if something happens in the future, I feel like you could muddle through that if you’ve got a partner—and a second income. Not that it wouldn’t be stressful. But I just thought, “Okay, I can see my future. I think I’m going to be single.” I felt it was a big gamble for me to take on ownership of a property not knowing what the future holds. It’s different strokes for different folks, but I don’t regret not purchasing.

Affording rent in a pricey market

I love my apartment, I love the location. It’s my home. But, I also feel that I can’t afford to move even if I wanted to, because I know that I’m not going to get a similarly sized department in as good a location for the same price. I’d be paying $2,000 a month. 

“Could I be priced out of my current apartment?”

That worry is ever-present. There’s that theory about how 30% of your income should go to rent. Well, I think I’m nudging closer to 50%. I was just going to say I’m not stressed, but if I’m always thinking about it, I’d say that’s stress, right? Every time I pay my rent, I’m thinking, “This is only ever going to go up.” My salary is not going to go up at the same percentage. At some point, there’s going to be a disconnect. 

I mean, right now I’m earning a very good salary, but I’m realistic enough to know that nothing is forever. Will I still be in this job in five years’ time? Probably not. But I can’t afford to move. So, what gives? I’m 50. My friends roll their eyes when I say this, but realistically, I should be thinking about retirement. I don’t want to live anywhere else. I choose to live in Toronto. I like city life—I certainly don’t see myself out in the suburbs or the country. So, if I choose to stay in my apartment, what else do I have to sacrifice and what happens when I retire? What happens when my pension doesn’t cover my rent—just rent, not hydro, not Rogers [services], not anything else. What do people do? I don’t know the answer. 

Advice on renting vs. buying from a financial planner

“I am dealing with clients who are on both ends of the spectrum,” says Kelly Ho, a Certified Financial Planner and partner at DLD Financial Group Ltd. in Vancouver. “And what I mean by that is, I have clients who are currently making decent money, who are in their 30s and 40s and are renting and would like to buy, but their choice is either saving for a down payment or paying rent.” 

In either case, Ho’s approach is to helping those clients decide which choice is right for them, financially speaking, is to hammer out the numbers—and not just for a week or two. She digs into clients’ fixed expenses, their discretionary spending and even their risk of illness. “We [may have been] counting on one’s ability to be able to earn x amount for x number of years to meet a particular goal. But that’s a huge risk, especially for those who are single, right? You have no one else to fall back on if something happens to you,” she says. 

Ho recommends finding out what your employer offers to cover those risks. “What does their long-term disability plan look like? Do they offer critical illness or life insurance? And, if not, is that something we should factor into your personal plan?”

Ho also says Young might benefit from being less rigid about her plans for retirement. “A lot of my clients are okay with moving in retirement,” she notes. When asked why they live where they are now, many will respond, “It’s because my work is here. This is where the job market is. This is where I need to be.” However, when they’re ready to move on from their careers, they’ll often say, “I’m open to moving to a cheaper place so that I can have a more fruitful retirement.”

RELATED ARTICLES:

• Would I be better off renting?
• Can we afford to buy a cottage?
• Does a spouse’s real estate ownership cancel out first-time homebuyer qualifications?
• Is it best to own a first home as an income property or a primary residence?