The Decibel - Is multi-generational housing the next big trend?

Episode Date: June 29, 2023

Multi-generational living in your 20′s and even 30′s has become common as young adults deal with unaffordable housing rates across Canada. And more than half of parents surveyed by the Globe and Mail say their adult kids pay rent while they live at home.Rob Carrick, the Globe and Mail’s personal finance columnist, joins us to discuss his recent survey on parents charging their adult kids for rent and trends we are seeing when it comes to multi-generational homes.Questions? Comments? Ideas? Email us at [e-mail]

Here's a stat about Canada that I want you to think about. 35% of young adults between the ages of 20 to 34 live with their parents. That's one in three adults according to the most recent census data. And you might be thinking this is a Toronto or Vancouver problem, but this trend isn't just affecting these stereotypical expensive cities. The number of young adults living with their parents has been growing the fastest in the big cities of Alberta and Saskatchewan. So today, we've got Rob Carrick back on the show.

He's the Globe's personal finance columnist, and he recently did a survey on this issue and the controversial idea of parents charging their adult kids rent. I'm Cheryl Sutherland, and this is The Decibel from The Globe and Mail. Rob, it's great to be talking to you today. Glad to be here. So Rob, you're a veteran personal finance columnist, and you get a lot of emails, I'm sure you cover a lot of topics, but I want to hear about what type of feedback you're hearing from your readers about young adults living at home with their parents. What are you hearing?

Cheryl, I got to be honest, I am not hearing a lot. And I'll tell you why. It's a topic that people are not really talking to everybody else about. If you've got kids living at home, it's kind of a private thing. You'll talk to your friends and your family about it but it's not something that you're uh broadcasting to the masses but i know a lot of it's happening because i can see it in my own extended family and um you know i know from census data and from surveys etc that it's happening and it's a very common thing but people are keeping it private is it kind of like a shame thing? I'm wondering. I think that originally there might've been a tinge of that, but I don't think it's that. I just think it's considered a private family matter.

And, you know, when you're talking to your family members and your friends and your group, you know, you're going to compare notes. And I know a lot of parents of millennials and Gen Zs will be experiencing this, but there's not shame, but it is private. Let's also define what we mean when we say young adult, because, you know, that can mean a lot of things, but what age range are we mainly talking about when we think of these adult kids living in multi-generational homes? Well, I would say it starts at about 20, 20, 22, let's say, and goes up to 40. Let's be honest. I mean. Yeah, I mean, I've been doing some research

and some surveying on adult kids paying rent. And as part of that, I found out that there's a substantial chunk of 30-somethings living at home and even a fairly significant number of 40-somethings. Yeah, so what are the numbers of people in their 20s versus their 40s, some of the percentages? So 33% of the parents who participated in my survey, and it was close to about 1000 parents,

roughly one third were 22 to 25. To me, that's the sweet spot. That's the normal spot. Fine, you make a pit stop at home, living at home after you graduate till you get a good job or your career advances enough that you can afford like big city rent or you get your house payment in order. And then the next chunk, almost another third were 26 to 30. Again, fine. Who's going to think twice about that? But then we get 31 to 35. That was 14%. And then another 4% were 36 to 40. And here's the kicker. 4.5% were over 40. So in the group of survey participants, as I say, close to 1,000, 42 parents had kids over 40 living at home. That took me by surprise. Interesting. It's also probably important to point out that multi-generational homes are common in certain cultures, right? And as we see the census data change,

there's also demographic changes in Canada. So how is that factoring into the rise of these living arrangements? Well, I think the cultures where this is common are kind of, they have set an example for the rest of the country. This is a sensible, practical way to address high housing costs. And I think that more people are going to be doing what these cultures have done since forever. There's no choice, really. I mean, if you can't afford rent and you can't afford to buy a house, what do you do? If you're fortunate enough to have a family that you can move back in with, that's what you do. And so these are kind of communities with sizable South Asian populations, for example, right? And even indigenous households. This is kind of a common thing that happens in these households.

Right. It's been done and it will be done. And I think more people will follow along because it just makes good sense. It's also worth pointing out, Rob, though, that this is not something that every family can do. Correct. Some families just do not have the living space. Some families don't get along. It's not practical in every case. But where it is, I think there is an increasing realization that this option has to be considered. Something I'm thinking about is that people not affording to move out is not actually a new trend. We know that the housing in Canada has been unaffordable for a while, but the data that we're talking about shows that since 2016, the multi-generational living arrangements has increased. So what is it about this specific time that's different than before? What are we seeing?

To me, the story of young adults moving home really became something that we all had to grapple with back in 08, 09, after the financial crisis and the recession. The job market for young people was terrible back then. something that we all had to grapple with back in 08, 09, after the financial crisis and the recession. The job market for young people was terrible back then. And then there was this phenomenon of the boomerang generation, if you remember that phrase, all these young adults moving back home, what's wrong with them? Well, there was nothing wrong with them. What was wrong was the job market.

And so we sort of began to normalize the idea of young adults moving home back then. But in the last five or so years, housing took off like a rocket. And 2021 was a monster year for housing. And I think that just basically closed the door on homeownership for a lot of people. And we haven't seen anything happen in housing since then to make it more affordable. And in that light, this is where I think the moving back home thing kind of became almost an economic necessity. I think unless you see rents going way down, or unless you see house prices going way down,

I just think this is the future. Yeah, I mean, we recently had you on the decibel talking about millennial debt. And just this idea of even just to get a down payment for a house is just so much higher, right? So it is becoming so much more difficult to get into the housing market. So I guess these type of living arrangements become more of a common thing. Well, the average price of a resale house in Toronto is over a million dollars. That means the minimum down payment you need is $200,000 plus. So that is a tremendous amount of money to save and if you're paying rent in toronto where the average price of a one-bedroom apartment is probably two thousand plus that is a tall order

and if you move back home and you pay a modest rent to your parents then you can start to put away that money that will get you eventually to two hundred thousand but it will take a lot longer than it used to it will so you'll have to partner up with somebody. We'll be back after this. Okay. So we've established that living at home is more common happening with adult kids well into their thirties and maybe into their forties. And Rob, you recently did a survey looking at the parent side of this, specifically parents that are charging their kids, which I don't know, controversial maybe. And you had 960 respondents. What percentage of parents did you find charge?

51.9%. That is the number. So it's a majority are now charging rent. I think it's high. Yeah, I agree. I think if I'd done the survey back, you know, when I wrote my book back in 2012, I bet it would have been like 10, 20%. I think it's wearing my parents.

I think they feel like they need to impose some sort of financial discipline on their kids or teach them how the world works. And most parents are charging a symbolic rent. They're not, you know, they're not going in red hot with market rents, you know, please pay me $2,000 a month. You know, the most common rent is $500 or less. Rob, what did you find out about where that money is actually going? Oh, you know what, it's interesting. About 10-12% of parents are taking the money, and they're putting it in savings and they plan to

give it back to their kids when they leave about 10 percent of the parents said they need the money for to help them run the house and the rest weren't really very specific on it but i suspect that keeping the money aside saving and presenting it back to the kids later on is a not uncommon thing and i'm quite in favor of that. In fact, if your kid says, I'm really close to having enough for a down payment or for first and last month's rent, you could say, well, here's all your rent money back. And now you can go tomorrow. Yeah, yeah.

I'm curious to know if the parents are keeping that as a secret or are they actually telling them they're saving it? Yeah, that I didn't delve into. But it's a really good question. I would, you know, if it were me, I'd probably keep it secret. But that's me. Yeah, I'd be a surprise amount of money when you're about to move out. I'd be very excited about that. I'm assuming there are probably strong feelings about whether or not to charge your kids. But from the reporting you've done, you talked about the parents side, but what do young readers say about their feelings around this? Well, I didn't survey

young readers about paying rent, but let me put it this way. What I've always suggested is if you're a young person and you're moving back home, approach your parents about paying rent. Don't let it hang in the air or don't let your parents bring it up to you later on because they think you're not pulling your weight. Go to them and say, here's what my income is, or I don't have any income. Here's what I can afford to pay in rent. And if it's zero, here's what I'm going to do to offset that with chores and maybe paying utility bills and that sort of thing. And I should add that some of the parents that aren't charging rent are getting help from their kids, either

financially in the form of money for groceries or utilities, or they're doing work around the house. So there is an economic way of paying for accommodation as well, other than rent. It's interesting because our summer producer is talking about how living at home sometimes there are some awkward moments, right? Because when you're living at home, there would be like a parcel coming from Amazon and she gets some eye rolls when it's a Sephora package. So, you know, there can be these awkward moments happening between adult children and parents. Can you kind of talk about these other ways about negotiating with your parents when these types of situations happen? Well, I can think of far more awkward moments than a Sephora package.

And I think you need to get that out on the table what if i'm having an overnight guest you know what if i want to uh kick back with recreational uh substances you know how does that work is it okay if i do it in the basement is it is it strictly forbidden in the house i'll get it all on the table you know in fact you have to have sort of like a business meeting when this all starts talk about red talk about um uh comings and goings and who's going to pay for groceries and how much you're going to contribute to not just the finances of the house, but keeping the house running. What about laundry? What about keeping the grass cut, housework and that sort of thing? Get it all out front. The worst thing is for your parents to get annoyed with you and then come back at you with all these grievances and then there's a big fight about it.

You know what, if you're gonna be an adult moving back home, act like an adult. My advice to kids is don't reassert your kidness back in the house. Come back as a grownup. So I could see why some young adults might feel like, it might feel like a failure to move back into your parents' house. Are there any benefits for both the adult kids

and the parents in these kinds of arrangements? Well, you know, my experience is that adults kind of like having their adult kids around. I mean, yeah, it might be some of the best times you have as a family, honestly, but it can wear on you too if your kids are, if you feel your kids aren't launching or they're not doing enough. So I think you need to have, you need to have good discussions about how things are going to go and how things are going once you're in there. Now, benefits for the kids, there's a huge economic benefit. If you don't have to pay market rent, it opens up a huge opportunity to save money and to

get your finances in order and to build your career and to put yourself in a position where when you leave, it's a one-way trip and you're on your way to financial independence. I like to think of it as a pit stop. You're there for a short period and then you're moving on to the next stage. And I think when you move back home, you've got to think, what is my plan? How long might I be here and how will I get myself on to the next leg? When you say launch, what do you mean by that? Economic independence. It means having a job with sufficient income to rent a place and save and

live your life and get yourself sort of on that path towards home ownership, which is what most people aspire to. And so this idea of launching, it's not happening as quickly as it used to. I've been in the workforce for a few decades, several, many decades. And, you know, back in my day, it was common to graduate, get a job, and you're off. You were launched. And the launch is taking longer and longer and longer. And I know there's going to be a tendency to say, what is wrong with these young kids today? And I think it's the economy, strictly the economy. But it is, there's a lot of friction in launching, and it's getting harder and longer. And that explains to me why there's more, there's more kids than ever before who are doing this. So this trend of living with your parents into your late twenties and into your

thirties, and as you found out, sometimes in your forties can come with negative stereotypes. And I'm kind of thinking about the guy living in his mom's basement. I mean, Rob, you even wrote a book about how not to move back in with your parents back in 2012. But do you think that this stigma is changing for young adults? Like, is it maybe OK to now live with your parents for a little bit longer? Yeah, it is. You know, I've heard the term revolving door used by parents for their houses. And it's like they're just sort of saying, you know what?

They're coming. they're going. My kid got a job. It was a temporary contract. They moved out with roommates. Then they lost that job or that contract ended and they had to come back home for a while or they're going back to school. I think that's where we are right now.

There's no stigma to it. It's sort of a normal, practical thing. No one's bragging about it, but it's done. And I just want to know, what's your advice for young adults who need to decide between wanting to live independently of their parents, but also are struggling with making ends meet for rent? What's your advice here? You know, I think it's okay to struggle a bit with rent and be financially independent in your own place. I do you know if you're spending uh 30 40 uh 50 it's a bit extreme but the ideal is 30 or less if you're spending in the 40s uh but you have prospects of growing your income and building your career it's

okay to do that for a little while i i i think living on your own is great and it's an important stage in life but if you can't make it if you cannot afford all your costs, then move home if you can. If your parents are cool with it, do it because it's a lifesaver. So Rob, what I'm hearing is that it sounds like 30 or 40% of your take-home income for rent is kind of a good benchmark for knowing if you can move out. 30% of gross income or less is ideal. Now, I don't know many people who are able to pull that off these days. So I'm thinking we're going to have to realistically go up to 40. And at 50, I think you're really going to find you don't have much money to do all the other stuff you

want to do and hopefully put a little money away. Because I know a lot of young people aspire to get into the housing market and you have to be in an arrangement. If you want to get into the housing market before you turn 65, you're going to need to save aggressively for a down payment. And you can't do that if all your money is going to rent food and activities. And my margin for struggling would be one or two years of doing that, but there's got to be prospects for you, for you improving your situation. And I think a lot of young people in their careers will find that. And even in today's job market, once it was really tough for young people, now it's quite favorable.

So if you're going to struggle for a little while, it's okay as long as you feel that I'll get more ability to afford my rent and more ability to save for home down payments in the next couple of years. And on the other side, what is your advice for parents who may be new to navigating this situation

and feeling more financial pressure to support their children? You know, I think that's one of the biggest changes in parenting in the last 25 years has to be this fresh obligation to support your kids after they graduate from university. And it's not just having them move back home. It's trying to come up with help to buy a home down payment. It's paying their cell phone plans and their car insurance and helping them with groceries. I mean, I've heard about all this happening. It's tough. I do think parents can no longer look, think, okay, my kids graduated and they've got a first job. I am done with that. The costs of parenting are continuing on and on. And with housing being as expensive as it is, I just think we're going to see more and more of this.

Yeah. Rob, thanks so much for being on the show today. Glad to do it. That's it for today. I'm Cheryl Sutherland. Nagin Nia is our summer producer. Our producers are Madeline White and Rachel Levy-McLaughlin. David Crosby edits the show.

Adrian Chung is our senior producer. And Angela Pachenza is our executive editor. Thanks for listening, and I'll talk to you tomorrow.