Many Canadian households have moved from renting to homeownership during the past two decades, according to a new report from Statistics Canada. Almost 70 per cent of Canadians were homeowners in 2005, a significant increase compared to about 60 per cent in 1986.
The biggest shifts toward homeownership were in Manitoba, Saskatchewan and Alberta where housing markets have soared to unprecedented heights in recent years.
The only provinces where home ownership didn’t increase were Newfoundland and Labrador, and P.E.I.
The report said low interest rates, attractive financing options and strong economic conditions have encouraged Canadians to buy, even though home prices are increasing at a much faster pace than rental rates.
The Canadian Real Estate Association said that the national Home Buyers’ Plan, which was launched in 1992, has also helped thousands of first-time home buyers access homeownership over the past 15 years.
The move by Canadian households from renting to homeownership during the past two decades is providing new challenges for the nation’s residential real estate landlords.
The study, published in the Services Industries Newsletter, found that even though prices for homes have risen more rapidly than rents, households have consistently opted more and more for homeownership. As a result, only about three in every 10 Canadian households rented in 2005, compared with four in every 10 in 1986.
The study found that households turning from renting to owning in recent years tended to have higher incomes than those that did not. Therefore, Canada’s pool of renters is now populated proportionally more by low-income households than it used to be.
The fastest-growing segment of the residential rental market has been households in the bottom 20 per cent of income distribution.
The study also showed that elderly people are playing a larger role in the rental market than they did two decades ago. Younger people, married couples with children and single-parent households are playing a lesser role.
As the population ages, older households will likely represent an even higher proportion of renters, concluded the study. If so, landlords might be expected to provide better accommodation for aging renters, such as special facilities or equipment.
The study also found that due to an aging stock of apartments, residential landlords devoted 14 per cent of their operating expenses to repair and maintenance costs in 2004.
The shift from renting to owning over the past two decades has occurred, at least to some extent, across all income levels, most age groups, and in every province except Newfoundland and Labrador and Prince Edward Island.
Most notably, the role of households at the bottom of the income distribution level has grown rapidly in the rental market in the past two decades.
In fact, these households have been the fastest-growing segment of the residential rental market. Total spending on rents by households at the lowest income distribution level rose by 5.2 per cent on average each year from 1986 to 2005. This far exceeds the 3.4 per cent average growth recorded for all other households.
In 1986, these households made 24 per cent of all rent payments. By 2005, this proportion had reached nearly 30 per cent.
The study concluded that landlords are relying increasingly on the lowest income households to rent their units. The primary reason for this is the rapid shift away from renting towards homeownership for all but the lowest income households.
City-dwellers are far more likely than other Canadians to rent their place of residence. In 2005, 37 per cent of households living in Canada’s 14 largest cities rented their dwellings, compared to only 28 per cent of households elsewhere.
Québec has long been the province where households are most likely to rent, followed by British Columbia. Conversely, households least likely to rent are in New Brunswick and Newfoundland and Labrador.
In addition, between 1986 and 2005, every province experienced a decline in the proportion of households living in rentals, except for Prince Edward Island and Newfoundland and Labrador.
In other words, across most of the nation, households are more likely to be homeowners than they were 20 years ago.
The residential rental market has expanded most rapidly in British Columbia, where households spent $4.8 billion on rents in 2005, up 167 per cent from 1986. In 2005, households in British Columbia accounted for 16 per cent of Canada’s residential rental market, up from 12 per cent in 1986.
Younger households are over-represented in the rental market relative to the size of their population. Those headed by someone younger than 35 accounted for 34 per cent of all household spending on rents in 2004, even though they comprised only 20 per cent of all households.
Nevertheless, young households are not as predominant in the rental market as they were in the 1980s. For instance, in 1986, households headed by someone younger than 35 accounted for nearly half of all household expenditures on rents in Canada. By 2004, this proportion had fallen sharply to just over one-third.
In the last two decades, a number of factors reduced the importance of this age group in Canada's residential rental market. First, they now comprise a smaller proportion of Canada's population of households. Second, they are more likely than previously to own rather than rent their place of residence. And finally, there has been an increase in the number of young adults returning to live with their parents. Many of these young people would otherwise have been renters.
Older households, those headed by someone aged 75 or older are also playing a larger role in the rental market. In 2004, they made 11 per cent of all rent payments, up from seven per cent in 1986. This is not surprising given the gains in life expectancy.
Almost half of all rental households are headed by single individuals even though they comprise only one-quarter of all households.
In terms of total expenditures on rents, nearly 41 per cent of such spending came from single individuals in 2005. This was up markedly from 33 per cent two decades ago. There has been a relatively sharp increase not only in the size of Canada’s single population, but also in the number of these households that rent.
Between 1986 and 2005, the number of single individuals who rented rose 26 per cent. In contrast, there was a 3.7 per cent decline in the number of renters among other household types.
Also over-represented in the residential rental market are single-parent households.
However, their six per cent contribution to all rental spending in 2005 was down sharply from a 10 per cent share in 1986. This decline occurred even though there are now more single-parent families.
The primary reason that single-parent families now comprise a lower share of the rental market is that, on average, they are far less likely to be renting their dwellings than they were two decades ago. In 2005, 45 per cent of single-parent households were renters, well below the proportion of 64 per cent in 1986.
On the other hand, couples (married and common-law) are under-represented among renters. In 2005, they comprised 63 per cent of Canada’s households but represented only 43 per cent of Canada’s rental spending.