Renters have harder time accumulating wealth than homeowners in Canada

Published March 14, 2024 at 11:43 am

An RBC economist says Canadian renters are devoting more of their income to housing costs compared with homeowners, making it harder for them to accumulate wealth and threatening to widen inequality between renters and homeowners.

A new note to investors from Carrie Freestone paints a picture of the Canadian real estate landscape, where nearly half of the Canadian wealth accumulation has been driven by homeownership for the past three decades.

She says homeowners saw their net worth grow from nine times household disposable income to 13 times since the fourth quarter of 2010, but renters only saw their net worth increase from three times to 3.5 times over the same period.

She doubts many renters will be able to enter the housing market with the limited ability they have to save for a down payment because many renters spend more than they earn.

Renters allocated an average of 25 per cent of their take-home pay to housing costs including utilities in 1999 compared with homeowners who devoted 23 per cent of take-home pay to housing that year.

In 2022, she found renters funnelled 29 per cent of their after-tax earnings to housing compared to 21 per cent for homeowners.