Recently, I wrote a detailed blog on why the Canadian Armed Forces (CAF) can’t meet its recruiting targets. Further to that post, the CAF announced it would allow Permanent Residents (PRs) to apply to the CAF. Subsequently, it was announced that 2,400 PRs applied to the CAF. This was an important and positive policy change for the CAF.
If done well, recruiting, training and holding onto PRs could go some distance to increasing the CAF’s enrollment numbers and increasing the diversity of the organization.
In my detailed recruitment woes blog, I talked about a number of other things the CAF could do to better recruit younger Canadians. Most recently, it occurred to me that there is another interesting approach the federal government could take to entice Millennials and Gen Z’ers to apply.
Outside of inflation, the number economic issue impacting Canadians is housing affordability. Because of a variety of issues, the purchase of a first-time home for hundreds of thousands of younger Canadians is more difficult than it has ever been.
Here are some of the recent numbers of what takes to get yourself into a “starter” home in various places across Canada:
- Average house price: $920,000
- 1-bedroom condo (700 sq feet) in Toronto-proper: $350,000 to $400,000
- 2-3-bedroom that needs some work $425,000 to $525,000
- Average house price: $330,000
- 2-3 bedroom average price single-family home: $450,000
- Townhouses, 2-3 bedrooms: $361,000
- Average house price: $1.6 million
- 1-bedroom condo in Metro Vancouver: $640,000
- 2-bedroom townhome in Metro Vancouver: $1.1 million
- Average detached home: $258,000
- Average detached home: $306,000
I’ve provided a range of prices to give a decent feel of prices across the country. As a young person, where you choose to live can make a huge difference in terms of what you pay. If you’re prepared to live outside of Toronto, Vancouver and a few other major centers, many young people can still find relatively affordable place to live.
However, the fact remains that the most expensive cities are also the places where younger Canadians tend to end up for employment. Despite our recent experience with remote work, the vast majority of employers in Canada’s largest cities will not let their employees work from home in more affordable locations. For better or worse, the majority of young Canadians have to live in locations that are close to their place of employment and are prohibitively expensive.
So how can the CAF use the country’s housing situation to its benefit? Simply put, it should offer a low-interest loan program that it can offer its soldiers to help them afford their first home.
Here’s How it Might Work:
Let’s say you’ve just joined the Canadian Armed Forces. You’re twenty-two years of age and you’ve signed a four-year commitment. You’re in the Air Force so you’re posted to different two bases – let’s say Comox, BC and Trenton, ON. For these first four years, you live on base housing and then you rent a place off base. But for each of those four years, the CAF sets aside a $4,000 housing bonus that you can use for the purchase of your first home.
After four years, you’ve $16,000 plus you’ve saved another $16,000. That’s 32 large. Not bad.
You elect to get out with four years. Because you’ve honored this commitment, you now have access to the CAF’s First Time Home Purchase Program (FTHPP).
With your saved downpayment, let’s say you start to look for a place to live in your hometown in Oshawa, Ontario. The average cost of a home in Oshawa is approximately $700,000. Let’s say you want to pick up a fixer upper at around $550,000. Let’s do the math and we’ll see how much money is needed.
- Current rate for a mortgage in Canada is around 5% for a five-year fixed term.
- You’ve got $32,000 for a downpayment, which leaves you with $518,000 that needs to be funded. For folks getting technical, let’s assume this soldier’s parents kick in the closing costs.
- At an interest rate of 5% on a five-year term, this soldier is paying a whopping $3,100/month. This does not include property taxes or utilities. Throw these in and our soldier is looking at something in the range of $3,600 per month. Just for their mortgage.
- Now let’s say this soldier, now 26 years old, lands a great job that has a starting salary of $65,000. Account for taxes, their take home pay is $3,900 per month. This leaves our four-year veteran with $300 for all other expenses.
- Obviously, this situation is financially untenable and unless the math changed somehow when the soldier applied for the loan, they wouldn’t have been approved.
Now Enter the FTHPP:
- In addition to the $16,000 it has provided to help with a downpayment, the soldier has access to a special mortgage rate. The rate is set a 1.99%. It’s not free, but it’s a much better rate than what the soldier could get commercially.
- At this mortgage rate and on a five-year term, the soldier’s monthly mortgage payment is now: $2,270/month. This leaves our soldier with $1,630 in salary for the month. It’s a radical difference.
- At the end of their five-year term, the soldier would have the option renewing for another five years at a rate that would be closer to the commercial rate, but it would still be lower. After this second five-year term, the soldier would graduate to a standard commercial loan.
A Few Other Details Regarding the FTHPP:
- The CAF or an agency of the federal government would be the lending arm for the program.
- The mortgage would have portability allowing you to move locations, or sell your property. Rules would be similar to any conventional mortgage agreement.
- In the event of a default, like a bank, the federal lending agency would assume ownership of the property and unload it back into the market, hopefully at a profit to the taxpayer.
- Now keep in mind that because the loans that are to be given are low-interest, not interest-free, they will generate revenue for the federal government. On balance, the program might not be able to pay for itself, but whatever revenues were made from the loans given, would off-set the cost of this program for the taxpayer.
No doubt there are more details to work out, but that’s the gist of it.
Now imagine if you would a young person thinking about joining the CAF. In today’s financial circumstances, would this program appeal to a young Canadian?
Most certainly it would, particularly if the federal government got its act together and increased the number of affordable housing units on CAF bases across the country, allowing young soldiers to live in affordable homes, further permitting them to save for the cost of their first home.
The R.A. Flannagan Writing blog is written by Ryan Flannagan, the author of Take Whiteman: A CANZUK at War Novel, Book 1.
Ryan’s blog is a grab bag but tends to focus on defence-related topics, topical items that set off the curmudgeon in Ryan, and the occasional update on his writing projects. An editorial note: Ryan reserves the right to blog on any damned issue that pleases him. If you’re interested in getting regular updates from R.A. Flannagan Writing, whether for Ryan’s writing or blog posts, please sign up here: https://raflannagan.ca/join-ras-newsletter/
Ryan Flannagan is the author of Take Whiteman, A CANZUK at War novel. Visit Ryan’s website: www.raflannagan.ca to learn more about Ryan and his writing.