Homeowners face 'absolutely dreadful' prospect of losing their houses as cost of living rises

Things were about to start looking up, Gordon McRae thought as he climbed the steps of the heritage home just outside of Brandon's downtown.

It felt massive, he said, especially compared to the basement apartment where he'd been living in the southwestern Manitoba city. And when it dropped to a price point he and his girlfriend could afford in early 2019, they bought it: their first house together.

"It felt absolutely amazing. That kind of a life goal was being completed — just that kind of relief that things are going to start looking good. Things are going to get better," the 35-year-old said.

As someone who's had to live in his car before, McRae said buying a house was something that had once felt out of reach for him. But at that moment, it was like everything had fallen into place.

"I was excited to start new and actually, you know, live a decent life," he said. "But that didn't last very long."

Less than a year later, McRae's hours at his wholesale job started getting cut. As the cost of living went up, he got a second job driving for a food delivery app in the evenings.

In a span of a few years, he said he's gone from making enough money to put away some savings to racking up debt.

His bills are adding up too, like the nearly $250 he pays for phone and internet, which he needs for work and for when his 14-year-old daughter comes over on weekends and needs to do homework.

Now, as the inflation rate continues rising, McRae said he's running out of ways to cut back. Some days, he gets by on just the bowl of cereal he eats in the morning. Others, he turns off the heat to try to keep his utility bills down. 

McRae said he's worried the next thing he'll have to give up will be a big one: his house.

He said he's not sure what he'll do if that happens, especially with many monthly apartment rents well above what he pays for his mortgage.

"I've been keeping up with my mortgage payments, but only because I'm not eating as much, just so I could at least keep a roof over my head," he said.

"It's absolutely dreadful knowing that I could be homeless again."

'Don't want to lose everything'

For Laura Warren, the fear of losing her house is front of mind lately.

While a paycheque from the hair salon where she works was once enough to afford the mortgage on her 700–square-foot bungalow in Winnipeg's West End, Warren said the pandemic has been tough on her industry. 

First, there were the shutdowns. Now, once-regular clients are coming in less and less often, leading to a drop in income.

For a while, she got by on a line of credit. Then came a credit card. The 52-year-old took out the last of her retirement savings to pay the card off a few weeks ago, she said.

Her budget has been stretched even thinner by unexpected expenses. She needed to get financing to replace an air conditioner last year, and a reassessment of her house's value raised her property taxes a few months ago.

Warren said she's had to start choosing which bills will get paid on time every month. And when her mortgage comes up for renewal in a few weeks, she's afraid she won't be able to keep the house.

Whether she could afford to rent an apartment is hard to think about — but even tougher is the thought of what selling her house could mean for her five pets, all adopted from rescue groups she volunteers with.

"I know with the housing market right now, sure, I'd probably make money on it. But then what? Then I'd have to go and try and afford something else, and I mean, you don't get a lot smaller than this. And I can't have two large dogs, a chinchilla and two lizards in an apartment," she said.

"I don't want to lose everything I've worked so hard for. Especially when it's something that's completely out of my control, because I'm doing everything I possibly can."

Right now, Faria Sheikh's mortgage payments still fit her monthly budget.

But with the cost of essentials steadily increasing, the Winnipeg support teacher said her budget has been stretched tighter than she's used to. 

The 50-year-old said she's not losing sleep over whether she'll have to downsize from her house in St. Boniface right now and move somewhere else with the younger of her two children, nine-year-old Nicholas.

But she is thinking about it a lot more lately.

"It's probably a little far off still for me. I try not to worry about money because I feel like there is always a solution that doesn't involve spending as much money. I do feel like I'm running out of some of those creative ideas, however, at this point," Sheikh said. 

"But it is definitely taking up a lot of my mental energy. I do consider it and think about it and wonder whether I should be planning for that outcome."

More affordable housing needed: expert

For some struggling homeowners, taking a step like downsizing to save money might be an option. But that choice isn't available to everyone.

Those who were already at the lower end of the housing market when they got in may now be holding on to their homes "by their fingernails" as costs rise, said Jino Distasio, a professor of urban geography at the University of Winnipeg.

"For some in the market, there is no further way down. They're at rock bottom. And it's really at that point where we've got to start seeing some more programs and solutions," he said.

Distasio said more effort needs to be put into developing affordable housing, starting with a focus on those who make the least money.

While money spent through the federal government's National Housing Strategy could help over the coming years, that won't be soon enough for some people.

"In some ways, we need things now. And we don't really have [the] mechanisms to rapidly support the housing market if conditions change dramatically," Distasio said.

"I think the next 12 months are going to be very, very challenging."

If one recent survey of mortgage customers is any indication, trends in the housing market could be placing even more people in a dicey living situation, said Shauna MacKinnon, an associate professor and chair of the University of Winnipeg's department of urban and inner-city studies.

Sixty-five per cent of the 3,502 recent mortgage consumers who responded to the Canadian Mortgage and Housing Corporation's 2021 survey said they paid the maximum price they could afford on the purchase of their home. 

Another 17 per cent of those respondents indicated they preferred not to answer that question — which MacKinnon said suggests the actual number could be even higher.

"When you think about that in the context of rising prices for other things, these people are going to be in a very precarious situation, too," she said.

"So what happens to them? Do they just sell their homes? Do they wait and try to ride it out? Some will be able to, and then others may lose their homes."

The online survey was conducted across Canada in partnership with a third-party research firm between February and March 2021, and all of the respondents had undertaken a mortgage transaction in the past 18 months. Since the results of the online survey did not come from a random probability-based sample, a margin of error cannot be calculated.

Facing the future

For now, some struggling homeowners are focused on doing whatever they can to hold onto their houses.

Sheikh said she's thinking about whether she should fix up her basement suite to rent it out for some extra income.

Warren is also considering whether she needs to rent out her house's small second bedroom — even though that's usually where she puts up foster animals — or find a second job.

And McRae said he'll keep skipping meals if he has to, because the roof over his head comes first. But he's worried his budget has already been stretched as far as it can.

"This is about as far as I can go, financially. If anything goes up by, like, a penny or a nickel, then I'm going to start going into debt just to cover that nickel," he said. 

"And as inflation gets higher and higher, I'll be going further and further in debt, borrowing money just to get by."

The prospect of losing homes as cost of living rises

2 years ago

Duration 2:27

For many Manitobans it's the place you wake up in the morning and the place you go to sleep every night. But as the inflation rate continues to rise, some homeowners say they're worried about losing their houses.

This story was possible in part thanks to Manitobans who filled out CBC's survey on inflation. In it, we asked people to send us their top concerns about how steadily rising prices at the grocery store, gas pump and other places have affected their lives.