assignment 2

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School

Algonquin College *

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CST8101

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Economics

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Feb 20, 2024

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docx

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Uploaded by JusticeGull1980

Derrick roberts 101127505 Assignment number 2: 1.To determine if Chris and Sam can afford a house, calculations must be done to determine their net income and debt-to-income ratio. Chris's current salary is $72,000 and Sam's current salary is $45,000. After subtracting 25% for income tax, CPP premiums, and EI premiums for Chris and 22% for the same deductions for Sam, the total net income for the couple would be $88,900. To calculate the debt-to-income ratio, the total debt must be calculated. This would include the anticipated costs for daycare for two children and the costs for a car (whether new or used). It was quite challenging figuring out calculations having to do with the financial principles of mortgage qualifications with Chris and sam being able to afford house, adding up all the expenses, daycare costs, and if I had to go in depth I would even try to break down Chris and sam’s liabilities and assets to see what can be eliminated in order for them to be good. Using a mortgage calculator, such as the one found at https://www.ratehub.ca/mortgage-payment- calculator, the total debt-to-income ratio can be determined. By inputting the net income, mortgage rate (5.25%), and the mortgage amount (80% of the value of the house), a monthly payment amount can be calculated. This calculation should then be compared to the total net income to ensure that the debt-to-income ratio is at or below 40%. If the debt-to-income ratio is above 40%, then Chris and Sam may not be able to qualify for a mortgage. 2. The housing crisis in Toronto is a result of high demand for housing and a lack of supply. As the population of Toronto continues to increase, the demand for housing has outpaced the supply, driving up housing prices. This has had a profound impact on young adults, who are often unable to afford to purchase a home and are forced to rent. The high cost of rental housing has also had a negative impact on young people, as it reduces their disposable income and makes it more difficult to save for future goals, such as purchasing a home or starting a family. To address the housing crisis, the government must focus on increasing the supply of affordable housing. This can be done through various initiatives, such as providing incentives for developers to build new housing, investing in public-private partnerships, and providing subsidies to low-income households. Additionally, the government should focus on creating more housing options for young adults, such as shared housing and co-housing, to help reduce the cost of housing. The high cost of housing has a negative impact on society, as it places an increasing burden on young adults, who are often unable to make ends meet. Additionally, it has a negative impact on the economy, as high housing prices reduce consumer spending and limit economic growth. 3. A reliable source to support the conclusions of this answer is a report by Generation Squeeze, entitled "Housing Affordability Analysis." The report examines the impacts of high housing prices on young adults in Ontario and Canada and discusses potential solutions to the housing crisis. The report can be accessed here: https://www.gensqueeze.ca/housing_affordability_analysis .

The report finds that housing affordability has become a major issue for young adults, with the median house price in Toronto now more than 10 times the median income of young adults. The report also discusses potential solutions to the housing crisis, such as increasing the supply of affordable housing and creating more housing options for young adults. The report also highlights the need for governments to take action to address the housing crisis, as it has a significant impact on the lives of young adults and the economy as a whole. Reference: Generation Squeeze. (2021). Housing Affordability Analysis. Retrieved from https://www.gensqueeze.ca/housing_affordability_analysis .

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