Canadians whose parents are property owners were twice as likely in 2021 to own a home than those whose parents are not, according to a new report by Statistics Canada.
The report, “Parents and children in the Canadian housing market: Does parental property ownership increase the likelihood of homeownership for their adult children?” found that parents’ wealth could — through gifts, inheritances, social capital and investment in education — make it easier for their adult children to afford a down payment or meet their mortgage payments.
The findings come as house and condominium apartment prices have increased sharply in recent years and even affordable rentals are becoming hard to find in many cities.
WEALTH BREEDS WEALTH
With a growing number of millennial and Gen Z Canadians priced out of the housing market, StatCan researchers Michael Mirdamadi and Aisha Khalid looked at how a burgeoning “inheritance culture” might be working to concentrate property ownership among families with intergenerational wealth.
Using administrative data from the Canadian Housing Statistics Program, Mirdamadi and Khalid focused on tax filers born in the 1990s. They found that the rate of homeownership in 2021 was 17.4 per cent for the adult children of homeowners and only 8.1 per cent for the adult children of non-homeowners.
Adult children whose parents owned multiple properties were nearly three times more likely to be homeowners, with a homeownership rate of 23.8 per cent, than the adult children of non-homeowners.
Furthermore, 52.8 per cent of people born in the 1990s who own multiple properties also have parents who own multiple properties, while only 10 per cent of those who own multiple properties have non-homeowner parents.
The link between parents’ housing wealth and their adult children’s homeownership was strongest among adult children who earned $80,000 per year or less, the study found.
People in this income bracket born from 1990 to 1992 were twice as likely to own a home if their parents were homeowners, while people born in the same period who earned more than $80,000 were only 20 per cent more likely to own a home than those in the same income bracket whose parents weren’t also homeowners.
The researchers also found that the adult children of multiple-property owners earn higher incomes on average than those of non-homeowners and single-property owners.
RETURN OF ‘PATRIMONIAL CAPITALISM’?
In addition to poring over housing data, Mirdamadi and Khalid analyzed the results of dozens of existing studies on housing in Canada, and found concerns around the attainability of homeownership for Canadians with no generational wealth is widespread and growing.
They cited one IPSOS opinion poll from April that found most Canadians who do not own a home claim they have given up on homeownership and that it is “now only for the rich.”
They also highlighted a recent analysis by the Canadian Imperial Bank of Commerce that pointed to a growing trend towards reliance on parental support in Canada, especially in the larger housing markets.
That report showed between 2015 and 2021, the share of first-time homebuyers who received a financial gift from family rose from 20 to 28 per cent, and the average amount received increased from around $50,000 to $80,000.
“This has led to a growing concern about intergenerational inequality and the rise of an ‘inheritance culture,'” Mirdamadi and Khalid report. “These concerns echo the findings of Thomas Piketty’s seminal study of wealth inequality…which argued that a growing gulf between the inheritors of great wealth and others might generate a return to the ‘patrimonial capitalism’ of the 19th century and earlier.”
Patrimonial capitalism, as described in Piketty’s “Capital in the Twenty-First Century,” is a theoretical economic order that arises when the rate of return on capital – for people who own property or other investments – exceeds the growth rate of the economy as a whole.
When this fortune is passed down through inheritance, Piketty theorizes it produces a class of people who are able to live on income from property or investments, while people who do not inherit wealth or property struggle to attain it.
“The effect of intergenerational wealth transfers on housing-based inequality is strongest in housing markets with less affordability, weaker rent controls and less stringent mortgage lending conditions,” write Mirdamadi and Khalid.
“Research has found that homeownership rates among young people have declined in many countries, including Canada.”