Two couples, four downtown jobs, two different lifestyles. As more Canadians trade off affordable homes for longer commutes, we spend a day in the life of two families travelling different roads
This is a tale of two families: the Lee-Wongs, who live in Toronto, and the Fuscos, who live in a suburb east of the city. Mornings see both families engaged in the same rituals as millions of other Canadians. Alarms go off, children are roused, breakfasts are eaten and lunches packed. There are car keys and transit passes to locate, and phone calls to confirm that grandparents will be there for after-school pickups. Then comes the last-minute scramble to make sure everyone gets to school and work on time. What makes these families different is how far the parents travel to their jobs in downtown Toronto. For the Lee-Wongs, the city core is just 13 km away. For the Fuscos, it’s a 100-km round trip.
Jimmy Lee, 32, works in IT at a major bank. He could take the subway to work, but he likes a guaranteed seat, so he pays $3 extra for the GO train (the regional commuter transit service). His trip takes 45 minutes, door to door, and he often uses the time to catch a quick nap. Jimmy’s wife, 37-year-old Tracy Wong, is an optometrist who owns her own practice and also works in another medical office. Half the time she drives to Etobicoke, a neighbourhood in Toronto’s west end, and half the time she rides the subway downtown. It takes her between 45 minutes and an hour, depending on where she’s headed. Their commuting costs are about $4,080 a year.
The Fuscos take a much longer route from their home in Ajax, a city of 90,000 people east of Toronto. Kelly, 37, is a nurse who switches between early morning, day, and night shifts. She drives to the downtown hospital district, and while a 7 a.m. or 7 p.m. start isn’t great for her sleep patterns, it does cut down on time spent in traffic jams. Commuting takes her up to 90 minutes. Antonio Fusco, 42, works in IT at the Hockey Hall of Fame and takes the GO train, a one-hour ride that costs $220 a month. If Kelly has time, she’ll drop him off at the train station; otherwise, he parks their second car at the commuter lot. Getting to work costs the couple about $6,600 a year—over 60% more than the Lee-Wongs pay.
What the Fuscos pay out in transportation, they save in housing costs. Their three-bedroom home in Ajax cost them $154 a square foot when they bought it seven years ago (it’s worth an estimated $213 per square foot today). The Lee-Wongs, on the other hand, paid $280 a square foot for their four-bedroom place four years ago, and it’s now worth at least $368. Their mortgage payments are $3,200 a month, twice what the Ajax family shells out. Families who live right in the downtown core make an even more dramatic trade-off between commuting costs and housing: two years ago, my husband and I bought a home four km from Toronto’s core. We spend $1,625 a year commuting by bicycle, public transit and occasional car sharing. Not including the finished basement, our house is worth about $518 a square foot.
For all the crunching of numbers, there’s a long checklist of factors people consider when choosing where to live. Balancing the size of the home one can afford with the time and money spent travelling to work is important, but so are school quality, crime rates and access to grocery stores and amenities. There is no one perfect neighbourhood that would suit every family—both the Lee-Wongs and the Fuscos say they’re happy and that they wouldn’t trade the city for the suburbs, or vice versa. Still, we wanted to look at the financial implications of each choice.
“We wanted to start a family, so we needed space to grow,” says Kelly about the move she and Antonio made to Ajax seven years ago. “I like to have a big backyard.” Before they married, the Fuscos rented an apartment in Toronto’s lively Greektown. They liked walking to restaurants and boutiques, and they really liked the quick subway trips to their downtown workplaces.
When they began thinking about having kids, however, it soon became obvious that houses in their urban neighbourhood were out of their budget. Kelly grew up in Scarborough, in the city’s east end, but even that was out of their price range. So the couple decided to move to the suburbs.
“It was a little hard in the beginning,” says Kelly. “Ajax had just started to grow, and we had to drive everywhere. But now we can walk to a lot of little bakeries and shops.” One great benefit of the move was that they were now only a 20-minute drive from Kelly’s parents, who live in the town of Brooklin. This became extremely handy when the couple had their first daughter, Sofia, four years ago. Their second daughter, Tania, is now two. The Fuscos currently pay nothing for childcare: in the morning, Sofia goes to kindergarten and Tania to free nursery school. Kelly’s schedule means that she’s off work some afternoons; otherwise, her parents handle the babysitting.
The Fuscos don’t mind the trade-off: they feel that extra time spent travelling to work allows them to enjoy more space at home. In fact, the family is moving even farther out this spring to Brooklin—an added 18 km from downtown Toronto, but just around the corner from Kelly’s parents. “We’re getting a much bigger house without a huge increase in our mortgage,” says Kelly. “We love the area, even if it’s a further commute.”
Distance from grandparents was also a major consideration for the Lee-Wongs. Jimmy grew up in North York, on the subway line above the city centre. He knew he didn’t want to move very far after he married Tracy, a Hong Kong expat, eight years ago. “My parents are older and my dad has Alzheimer’s,” he explains. “I need to be there to help my mom out.” It’s a mutually beneficial arrangement now that the couple has a three-year-old: most mornings, Tracy drops their son off at a Montessori school, and the Lee grandparents are responsible for the 3 p.m. pickup. Childcare costs the family $1,000 a month.
The couple’s first home was a condo just minutes from the North York office where Jimmy was working at the time. When they decided to buy a house, Tracy and Jimmy assumed their budget would lead them to the suburbs, not too far from Jimmy’s parents, but far enough out of Toronto that prices would be lower. The couple had bid and lost on two houses just north of the city boundary when a buyer offered them a great price for their condo. They sold it and moved in with Jimmy’s parents, then kept up their real estate search for a year and a half, still focusing outside of the city.
Then a house went up for sale one street over from Jimmy’s parents. The price was about 20% higher than the couple had budgeted for, but homes in the neighbourhood don’t go on the market very often. They decided to pounce. Built in the 1960s, the house needed major renovations, and Jimmy and Tracy had contractors strip it down right to the drywall. The move turned out to be more expensive than they expected. “We bought beyond our means,” Jimmy says. “But we have a philosophy—live now. We’ve seen a lot of family and friends saving, saving, saving to pay off the house, and once they do, they kick the bucket a year later.” Tracy and Jimmy are both ambitious in their careers, and they have no non-mortgage debt. They feel comfortable enough with their finances to take two vacations a year.
Jimmy says he’s happy the family decided not to move outside the city, even though homes there would have been much more affordable. “North of Toronto isn’t the suburbs anymore—it’s another city, and traffic is just as chaotic. We have friends that live up there and it takes them 30 minutes just to get close to downtown.”
Most people assume that living in an urban centre like Toronto is sure to be more expensive than life outside the city limits. We asked Alfred Feth, owner of Feth Financial Services in Kitchener, Ont., to look at both families’ income and expenses to see if that held true.
“If we just take these two families, it’s definitely cheaper to live in the suburbs,” says Feth. “But there ain’t a lot of difference.”
The higher amount the Fuscos pay out in transportation costs is still less than the difference between the families’ housing costs. But mortgage payments are the only dividing factor: both families pay property taxes that work out to about $2.40 per square foot of house.
The other big difference is the cost of childcare. While the Fuscos get free childcare from Kelly’s parents, most others aren’t so fortunate, whether they live in the city or the burbs. According to Statistics Canada, the average family spends $3,500 a year in childcare—but that number isn’t very useful, because it includes everything from occasional babysitting to live-in nannies. No national organization keeps stats on urban and suburban differences, but the topic is a hot one among parents on the online forums we visited. The average cost for daycare in Toronto and Vancouver is about $50 a day. In the suburban areas outside those cities, it’s often $5 to $20 cheaper. But there are huge regional differences: families in Halifax reported finding good childcare for as low as $20 a day, while a few parents from Vancouver quoted prices as high as $80 a day. Feth points out that the Lee-Wongs could save a lot by enrolling their son in full-day kindergarten next year when he turns four.
Feth believes that both of our families are living in homes they can comfortably afford. The Fuscos and the Lee-Wongs both spend less than 35% of their gross salaries on housing, although our urbanites are close to that upper limit. Kelly and Antonio have debts other than their mortgage, including a line of credit and an interest-free loan from their parents. But for Jimmy and Tracy, like many city dwellers, their huge mortgage is a hungry mouth always demanding to be filled. The Lee-Wongs do not make regular RRSP contributions because they put all of extra money towards their home loan.
While real estate is the largest single investment most Canadians make, Feth cautions people not to rely on their houses as a retirement plan. The federal government has tried to discourage buyers from taking on excessive mortgages by eliminating 40-year loans and increasing mandatory down payments. But Canadians continue to pile on plenty of mortgage debt. If housing prices drop significantly—and we’re overdue for a correction—things could end badly for homeowners with huge mortgages.
As well, a house is much less liquid than other types of investments. There’s no guarantee that you’ll receive your asking price when you’re ready to sell, as neighbourhoods that are trendy now might not be so in 15 years. Feth also says that people who use their home as a retirement plan underestimate its emotional value, and how hard it is to downsize. “There’s a huge difference between a house and a home. A house is an investment. A home is where you raise your kids.”
The Bigger Picture
The urban/suburban decision is often framed in terms of time saved in commuting versus the benefits of a bigger home. But that may be the wrong way to think about it. “In equilibrium, the extra commute matches the lower housing expenses, but people live differently,” says Trur Somerville, director of the Centre for Urban Economics and Real Estate at the University of British Columbia. In real life, he says, most downtowners and suburbanites don’t feel like they’re trading space for time. Rather, the choice often comes down to personal preferences. Some people want a backyard big enough for a hockey rink, while others see extra bathrooms as just more to clean.
Hardcore city dwellers might not understand that many families genuinely prefer living outside the city. “There’s a snobbery that you have to turn the clocks back an hour and put your mom jeans on when you move to the suburbs,” says Sarah Daniels, one half of the real estate team that hosts HGTV’s Urban Suburban. “But my clients are generally surprised at how much they like it. They realize it’s all people like them, who came from the cities.”
Her statement is backed up by data—the 2006 census showed that more people are moving out of Toronto, Vancouver and Montreal to the surrounding suburbs than the other direction. Most of the people moving are new parents aged 30 to 34.
Daniels says that the growth of businesses in former bedroom communities now means it’s easier to make a living outside of the city core. Even the term “suburb” is up for debate—developers hate it, preferring to market new communities as all-in-one urban areas. This is in part to avoid the stigmas still attached to the burbs, but it also reflects the reality that lots of people in these places lead lives that are totally separate from the city.
For suburbanites who do need to commute to downtown, however, traffic is a growing complaint. Across Canada, a quarter of workers spend 90 minutes or more travelling to and from work every day, up from 17% two decades ago. Toronto is the worst, with an average commute of 33 minutes one way, followed closely by Montreal, at 31 minutes. The commute in Calgary has increased 14 minutes since 1992. Health researchers have long pinpointed excess time spent getting to work as a cause of heart problems, back pain and stress. Of full-time Canadian workers who took 45 minutes or more to travel to work, 36% told Stats Can that most days were quite or extremely stressful. For people who had a commute time of 15 minutes or less, under a quarter of them felt equally stressed out. And the growth of suburban industry hasn’t eliminated commuting as much as sent it in the opposite direction—morning rush hour in the Toronto area now sees a lot of professionals travelling out of the city as well as into downtown.
Governments aren’t helping: in fact, they are artificially reducing the price of suburban housing by accommodating commuters, says Jane Londerville, an associate professor at the University of Guelph. She thinks regular car commuters should shoulder more of the cost for infrastructure and transportation. “Developers do pay a charge that goes to roads and fire trucks and libraries,” says Londerville, who teaches commerce and real estate. “But if you really calculate the cost of building and maintaining highways largely so that people can get back and forth to work in the city, then those charges really don’t cover the cost.”
Londerville would like to see Canadian municipalities raise money for roads and highways through fees aimed at car commuters. She points to London, England, where there are road tolls for entering the core, and mentions hefty development fees (along the lines of $10,000 a house) dedicated to transportation maintenance. The idea of road tolls has been floated in Toronto, but so far no Canadian politician has had the courage to make it happen.
Increasing access to transit in the suburbs would be one commuting solution that would be cost-effective for users. Jill L. Grant, a professor in urban planning at Dalhousie University, has interviewed plenty of suburbanites who would be happy to take transit to work if they could get a smooth ride with minimal transfers. In other words, a subway. This, unfortunately, is impractical when new neighbourhoods are built specifically so that people can live in single-family homes.
“Subways are not an affordable transit system to service low-density areas,” says Grant, who has studied Canadian development patterns for a decade. Even the loathed, lurching public bus is sometimes too expensive to run through streets of single-family homes. “I remember seeing a sign in a new subdivision outside Calgary that said ‘Future Bus Stop,’” she says. “Developers say these neighbourhoods are designed ready for transit, but the service can’t make ends meet.”
What We All Want
If money is the motive, then the cost of a suburban home is cheaper—although the savings are not as significant as families might hope. If quality of life is equally important, then every family needs to decide based on its personal wish list, whether that includes a backyard hockey rink or a sushi spot within walking distance.
If time is what you’re hoping for, well, that seems to be the working family’s most precious commodity. In 2001, the Public Health Agency of Canada did a survey on families and work, and asked participants what they would spend more free time on, if they had it: time with family; personal time; education; sports and fitness; or work. Nobody said work or education, and most people said family or themselves. “I’d have to say personal time, honestly,” said Kelly Fusco, whose work schedule includes at least one full day on the weekend. “I just do not get any right now.”
“Family time, for sure,” said Jimmy Lee, whose wife, Tracy Wong, spends her Saturdays at work. “By the time my wife gets home from work, my son is usually asleep.” Whether you prefer a big yard or a short commute, it appears that the one thing none of us can buy is time.
Source: Money Sense by Denise Balkissoon March 16th, 2012