A Tale of Two Canadas
Homeowners Getting Richer, Renters Getting
Poorer
Income
and Wealth Trends in Toronto,
Montreal
and Vancouver,
1984 and 1999
First in a series of
policy analyses based on Statistics Canada’s Survey of Financial Security
This
report is also available in PDF Format (Requires Acrobat Reader)
By J. David Hulchanski, PhD, MCIP
Director, Centre for Urban and Community Studies
Professor
of Housing and Community Development, University of Toronto
1. An
Urban Nation: Renters Concentrated in
High-cost Metropolitan Areas
One third of all Canadian
households live in the three largest metropolitan areas: Toronto,
Montreal
and Vancouver. Canada’s renting households are even more concentrated. Just
over 40% of all renters live in those three cities.
About 60% of Canada’s households are homeowners; the other 40% rely
mainly on the private rental sector. Only 5% of Canadian households live in
non-market social housing (in contrast to much of Europe,
where the average is 20%). The Montreal metropolitan area has the highest concentration of
renters (54%) compared to about 45% in Toronto and
Vancouver. (See Table 1.)
A major problem in all three
metropolitan areas, and in much of urban Canada, is the inability of the private sector to provide
new rental housing. Very little unsubsidized rental housing has been built
since the early 1970s. In explaining the lack of rental housing starts, housing
analysts usually focus on rent controls, municipal regulations and taxes.
Few, however, have examined
the ability of the potential consumer – the renter household – to pay the rents
developers would require to make rental investment sufficiently profitable. In
the late 1960s, when a great many rental apartments were built in urban Canada, the gap between the income of owners and renters was
relatively small – about 20%. Today that gap has widened.
Although some people rent
housing only when they are young, others will need rental housing throughout
their lives. They will never be able to afford homeownership and will always
depend upon the private rental and social housing sectors. These life-time
renters are at a particular disadvantage.
In 1984 and 1999 Statistics
Canada carried out a detailed survey of household income and wealth called the
Survey of Financial Security. Initial results from the 1999 survey were
published by Statistics Canada in March 2001 as The Assets and Debts of Canadians
(http://www.statcan.ca/cgi-bin/downpub/research.cgi).
This CUCS Research Bulletin
reports on a further analysis of the 1984 and the 1999 financial security data.
Special tabulations were obtained from Statistics Canada with a focus on
housing tenure: the income and wealth of owners
compared to renters. All dollar
amounts have been inflation adjusted by Statistics Canada to 1999, allowing a
comparison of the two periods (15 years apart).
2.
A National Overview of Income and Wealth
Canada has two distinct groups of housing consumers, and the income gap
between the two has been increasing by about 1% per year.
Between 1984 and 1999, the income and wealth of Canada’s homeowners increased dramatically and that of renters
decreased.
Homeowners’ wealth increased from being 29 times that of
renters in 1984 to 70 times that of renters in 1999. (See Table
2.)
Income and wealth of homeowners up, renters down
Income. Over the 15-year period, the median income of homeowners increased by $2,100 (5%) while the income
of renters decreased by $600 (–3%).
Wealth. The median net worth of homeowners in 1999 was
$145,000, an increase of $28,400 (24%) over 1984. For renters, the trend was
the opposite: median net worth decreased by $1,900 (–48%), from $4,000 in 1984
to $2,100 in 1999.
In 1984, homeowners had almost double
the income of renters (192%). By 1999, the gap had increased to more than
double (208%).
The income and wealth gap is huge
and growing
Income Gap: The gap
between the median income of homeowners and renters grew by 16% (from $19,800
in 1984 to $22,500 in 1999). In 1984, homeowners had almost double
the income of renters (192%). By 1999, the gap had increased to more than
double (208%). This represents an average growth in the income gap between
owners and renters of about 1% a year.
Wealth Gap: The gap in
the median net worth of homeowners and renters increased from $112,900 in 1984
to $143,100 in 1999. Homeowners’ wealth increased from being 29 times that of
renters in 1984 to 70 times that of renters in 1999. Statistics Canada reports that the most important non-financial asset
of Canadians, accounting for 38% of household wealth, is the owner-occupied
house. Home ownership is, therefore, a major (but not
the only) reason for the large gap in wealth between owners and renters.
Homeowners’ wealth increased from being 29 times
that of renters in 1984 to 70 times that of renters in 1999.
3.
Trends in Toronto,
Montreal and Vancouver
Income: Up in
Toronto,
down in Montreal
and Vancouver
In Toronto, the median income of homeowners and renters
increased, whereas in Montreal and
Vancouver it decreased. (See Table 2.)
Toronto.
The median income of owners and renters rose at about the same rate between
1984 and 1999: 10% for owners and 12%
for renters. In 1999 the median income was $54,000 for owners and $27,000 for
renters.
Montreal. The median income of owners remained about the same over the 15-year
period (a 1% decrease) while the income of renters declined sharply, by 16%.
The median income of Montreal homeowners in 1999 was $44,000 and that of renters
was $20,000.
Vancouver. The median income of owners and renters decreased between 1984 and
1999: 5% for owners and 10% for renters. In 1999, the median income of owners
was $47,000 and that of renters was $22,000.
Wealth: Owners up and renters down in all three
cities
In
Toronto and Vancouver, the average net worth of homeowners is about the
same (about $250,000). This is about $100,000 higher than the average net worth
of Montreal homeowners. The increase in net worth for homeowners
was greatest in Toronto ($74,000), followed by
Vancouver ($51,000) and Montreal ($35,000).
The net worth of renter
households ranged from a high of $5,000 in Vancouver to a low of $2,200 in
Montreal. Between 1984 and 1999, household net worth decreased
dramatically for renters in all three metropolitan areas: in Montreal by 51%, in
Toronto by 23%, and in Vancouver by 10%.
Toronto.
The median net worth of owners increased by 43% while that of renters decreased
by 23%. The median net worth of owners was $248,000 (up $74,000) and $3,300 for
renters (down by $1,000).
Between 1984 and 1999, household net worth
decreased dramatically for renters in all three metropolitan areas: in
Montreal by
51%, in Toronto by
23%, and in Vancouver by
10%.
Montreal. The median net worth of owners increased by 33% and that of renters
decreased by 51%. The median net worth of owners was $142,000 (up $35,000) and
$2,100 for renters (down by $2,200).
Vancouver. The median net worth of owners increased by 27% and that of renters
decreased by 10%. The median net worth of owners was $244,000 (up $51,000) and
$5,000 (down by $600) for renters.
4.
Discussion
What are the policy
implications of these trends in household income and wealth?
Two Canadas: Owners and renters
There are two very different
types of Canadian households in terms of income and wealth – and housing tenure
represents the divide between the two. The gap between owners and renters, in
terms of both income and wealth, has grown over the 15-year period. The quality
of the housing and of the neighbourhoods they live in has also changed.
Homeowners receive a tax
subsidy to assist in their accumulation of household wealth. Capital gains from
the sale of a principal residence are not taxed and first-time house buyers can
use their tax-sheltered registered retirement savings as a down payment. There
are no housing-related tax concessions for renters.
One residential land and housing
market
Although there are two
Canadas in terms of income and wealth, there is only one
residential land and housing market. Owners and potential owners (higher income
and upwardly mobile renters) have the ability to outbid renters for residential
land (that is, building sites). In order to compete with condominium developers
for land, rental housing developers would have to set rents too high for most
tenants. A thriving supply/ demand market exists in the homeownership sector,
but only demand and social need – without new supply – exists in the rental
sector.
The growing gap between owners
and renters
The gap between owners and
renters has increased by an average of about 1% a year. Canada’s population is, therefore, even more polarized by
income and wealth than in the past. This fact has serious implications for
rental housing supply. There has been virtually no unsubsidized new supply in
recent years – nor will there be as long as this polarization continues. The
low income and wealth levels relative to homeowners means
that many tenants have a social need
for adequate and affordable housing. They do not have enough money to generate
effective market demand.
Although there are two Canadas in
terms of income and wealth, there is only one residential land and housing
market.
The “dehousing” trend: more
homelessness
The gap between the incomes
and wealth of owners and renters means that more and more renters are likely to
have severe problems remaining housed. Canada’s housing system has no mechanism to ensure that
their need for adequate housing is met. Families are the fastest growing group
among the homeless, mainly because of a lack of affordable housing. This trend
is likely to continue until much more housing at lower rent levels becomes available.
Fewer renters will be able to
become homeowners
About 40% of all of Canada’s renters live in the high-cost housing markets of
Toronto, Montreal
and Vancouver. For homeowners, high and increasing house costs
contribute to their lifelong accumulation of wealth. For renters, it is the
opposite. High housing costs make it difficult, if not impossible, for them to
accumulate assets (such as the amount needed for a down payment) resulting, for
many, in lifelong impoverishment.
An aging stock of rental housing;
the need for new supply at modest rents
During the past decade, the
federal government has not added to the stock of social housing units. Most
provinces do not have social housing supply programs (Quebec and
British Columbia are the two exceptions). The private sector has not
built significant numbers of new rental apartment buildings for at least two
decades. Unlike the situation in the homeownership construction market (condos
and suburban tract housing), investors cannot build rental housing and make
money. The costs are too high, given the lower income profile of renters. Also,
condos compete with high-end rental units.
5.
Policy Implications
The household income and
wealth of renters is dramatically below that of owners, and the gap is growing.
Renter households may find it increasingly difficult to move into home
ownership. Government policies that focus on incentives for home ownership
(such as tax-exempt savings plans or the Ontario government’s waiver of land transfer taxes) do not
address the housing needs of the vast majority of renter households. The
federal government has not provided new social housing for low- and
moderate-income renters since 1993.
A comprehensive national
housing policy, with complementary regional policies, must address the very low
income and wealth of renters. Canada, more than most Western nations, relies on the
private sector to provide housing. Renters must find adequate housing in
housing markets in which prices are driven by the income and wealth levels of
homeowners.
Social policies and
traditional income assistance programs (social assistance, unemployment,
disability pensions, and so forth) must better address the growing income
inequality between owners and renters.
Federal and
provincial/territorial housing policies must recognize that very few renters
have incomes high enough to pay the rent levels required by unsubsidized new
construction. Increased supply – the construction of new rental housing – is
the only answer to low vacancy rates. Given the income and wealth profile of Canada’s renters, only significant public-sector
intervention will increase the supply of affordable rental housing.
In
summary, there is a growing social need for affordable housing among
renters. As the data from the Statistics Canada survey of financial security
demonstrates, there is very limited market
demand. The income and wealth levels of most renter households are much too
low – and continuing to fall relative to homeowners.
David Hulchanski is director of the Centre for Urban and Community Studies.
His research and teaching focuses on housing policy, social welfare,
community development and human rights. In the 1980s he was a professor in
the School of Community and Regional
Planning at the University of
British Columbia and Director of the
UBC Centre for Human Settlements. He has a M.Sc. and Ph.D. in urban
planning and is a member of the Canadian Institute of Planners. In 1997 he
was appointed to the only endowed Chair in housing studies in North America, the Dr. Chow Yee
Ching Chair in Housing.
The Centre for Urban and Community
Studies (CUCS) facilitates, co-ordinates and
disseminates multidisciplinary research and policy analysis on urban issues at
the University of Toronto. Established in 1964, the Centre’s research covers a wide range
of areas relevant to the social and economic well being of people who live and
work in urban areas large and small, in Canada and globally.
CUCS Research Bulletins present a
summary of the findings and analysis of the work of researchers associated with
the Centre for Urban and Community Studies at the
University of
Toronto. The aim is to disseminate policy relevant findings to a broad
audience. The views and interpretations offered by the author(s) do not
necessarily reflect those of the Centre or the University. The contents of this
Bulletin may be reprinted or distributed, including on the Internet, without
permission provided it is not offered for sale, the content is not altered, and
the source is properly credited.
Centre for Urban and Community
Studies
UNIVERSITY OF TORONTO
455 Spadina Ave, 4th Floor, Toronto,
Ontario, Canada; tel 416 978-2072; fax 416 978-7162
© Centre for Urban and
Community Studies, University of Toronto 2001
Table
1:
Canada’s
Three Largest Metropolitan Areas
Number of Households by
Tenure, 1999
Metropolitan Area
0wners Renters Total % Renters
Toronto
940,000 780,000 1,720,000 45%
Montreal
690,000 820,000 1,510,000 54%
Vancouver
450,000 390,000 840,000 46%
3 Metro Areas Total
2,080,000 1,990,000
4,070,000
Canada
– Total
7,375,000 4,840,000 12,215,000 40%
Three Metropolitan 28% 41% 33%
Areas
as a % of Canada
Table
2:
Comparison of Income and Wealth of Owner and
Renter Households
Canada, Toronto, Montreal
and Vancouver, 1984 and 1999 (1984 $ adjusted to 1999 $)
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Median Income
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Median Net Worth
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owners
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renters
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owners
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renters
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Canada
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1984
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$41,380
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$21,554
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1984
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$116,845
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$3,985
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1999
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$43,478
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$20,947
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1999
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$145,200
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$2,060
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change
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$2,098
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-$607
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change
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$28,355
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-$1,925
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% change
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5%
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-3%
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% change
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24%
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-48%
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owners
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renters
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owners
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renters
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Toronto
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1984
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$48,821
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$24,212
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1984
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$174,254
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$4,291
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1999
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$53,563
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$27,039
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1999
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$248,400
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$3,300
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change
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$4,742
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$2,827
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change
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$74,146
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-$991
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% change
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10%
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12%
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% change
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43%
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-23%
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owners
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renters
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owners
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renters
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Montreal
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1984
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$44,266
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$23,389
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1984
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$107,174
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$4,291
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1999
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$43,944
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$19,605
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1999
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$142,291
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$2,112
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change
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-$322
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-$3,784
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change
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$35,117
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-$2,179
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% change
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-1%
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-16%
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% change
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33%
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-51%
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owners
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renters
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owners
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renters
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Vancouver
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1984
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$49,982
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$24,407
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1984
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$192,340
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$5,574
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1999
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$47,310
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$21,897
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1999
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$243,550
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$5,000
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change
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-$2,672
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-$2,510
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change
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$51,210
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-$574
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% change
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-5%
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-10%
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% change
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27%
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-10%
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Source:
Statistics Canada,
Survey of Financial Security, 1984, 1999.
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