Here’s how important homeownership is to building wealth in Canada

In 2023, real estate equity represented 42 per cent of Canadian households' total wealth. Photo by Getty Images

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With Canadians heading to the polls in the federal election in less than a week, the persistent challenges of housing affordability stand as a central issue for voters. The political choices made today will not only shape their own financial prospects but also significantly impact their children’s ability to one day own a home.

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It turns out the same can be said for the housing choices parents make, as a recent study by Statistics Canada shows. And the ownership outlook for children of families who rent is notably different from those from families who own.

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As housing affordability has rapidly worsened in Canada over the past decade, many young homebuyers have relied on significant help from their parents — in the form of gifts or inheritance — to bolster the savings needed for down payments. Young renter families have received much less familial support in this regard than homeowning ones.

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According to Statistics Canada’s Carter McCormack and Timothy Sheridan, homeowners in 2023 inherited nearly three times more than renters, suggesting that inheritance from homeowning parents was instrumental in young families’ home purchases. Information extracted from the 2023 Survey of Financial Security shows that homeowners received a median inheritance exceeding $85,000, while renters received less than $30,000.

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The data further revealed that more than 40 per cent of homeowners received an inheritance or familial support to purchase a house in 2023, compared to less than 10 per cent of renters. An earlier report by Statistics Canada in 2023 indicated that children born to homeowners in the nineties were twice as likely to own homes in 2021 than those born to non-homeowners.

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In simple terms, homeownership by one generation creates a virtuous cycle of wealth-building that benefits subsequent generations. It is therefore surprising to see some financial experts and researchers glamourize renting as a lifestyle choice and speak of the “wealthy renters.” The rental advocates describe a “worry-free” lifestyle where a dwelling’s upkeep remains the landlord’s concern, allowing tenants to enjoy their shelter without hassles or added costs. Some argue that the relatively lower cost of renting enables tenants to invest their savings in higher-interest investment vehicles, leading to better long-term returns than those from homeowning.

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Statistics Canada, however, presents a different view of home ownership as central to household wealth creation. In 2023, real estate equity represented 42 per cent of Canadian households’ total wealth. For younger families, housing comprises nearly half.

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In times of worsening affordability due to rapidly rising shelter costs, homeowners become even more empowered to assist their children with housing. When housing prices rise sharply, the increase in home equity allows them to transfer larger amounts to their children. The median inheritance received by homeowners in 2023, for example, had increased by roughly $15,000 in four years — up from just under $70,000 in 2019. In contrast, renters’ median inheritance of $30,000 dropped slightly over the same period.