Digging Beneath The Surface: Is Housing Perpetuating A Wealth Divide in Canada?

Updated: Nov 7

https://economics.td.com/esg-housing-wealth-inequality


Summary Remarks


Counter to public perception, wealth inequality has narrowed slightly in Canada. Between 2005 and 2019, the share of wealth held by the top 1% and 10% both fell. Some ground was gained by middle and low-wealth households.


Real estate values have not contributed to a widening in wealth inequality. If anything, rising homeownership among the lowest wealth Canadians has helped to lean against it. To top it off, those driving the increase in homeownership at the bottom are young Canadians between the ages of 25 and 34 – the demographic that the public discourse would suggest is being priced out.


But, dig deeper and the story gets more complicated. These young households have higher incomes than the average low-wealth household, with many also benefiting from parental wealth transfers. Despite these advantages, the deterioration in affordability is resulting in higher leverage. This is the reason these households are bumped into the “low wealth” category.


Wealth inequality in Canada is not just a story of rich versus poor, it is one of homeowners versus non-homeowners. The average net worth of homeowners born between 1955 and 1964 is now more than $1.4 million. This is 6.3 times that of non-homeowners born during the same time.


With affordability now at its worst level in decades, the current generation of prospective homebuyers is facing the fate of missing out on housing wealth. Households without a starting point of a high income and/or an intergenerational wealth transfer face a high barrier into homeownership.

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