For a country that worships home ownership, we have a surprisingly diverse and fast-growing population of renters.
The percentage of people renting increased in every age group over the past decade, an RBC Economics report says. While young people and urbanites still dominate the demographics of renting, the biggest growth has come from baby boomers and residents of smaller cities.
The rise of renting is being driven by inflated house prices, immigration, an aging population and the growing number of people who live alone. At the worst possible time, renting has become the answer to all kinds of housing questions.
Renting is where we see the worst of the damage caused by the past decade’s sky-high house prices. Demand has given landlords the power to increase rents at rates far above even today’s high inflation rate. We can’t incubate future home buyers in the rental market like we used to; monthly rents simply make saving too difficult.
And yet, by a surprising combination of necessity and choice, renting has become a powerhouse trend in housing. RBC says the number of renters has increased at three times the rate of homeowners in the past 10 years, a period when the average resale house price jumped 90 per cent.
Owners still outnumber renters by 2:1, but the pool of people who rent increased by 876,000 households in the past decade while the number of owners grew by 770,000. Almost five million households were renters, according to the 2021 census, up from 4.1 million a decade ago.
Part of the story here is that soaring house prices delay home ownership for young adults. RBC says millennials are renting for three to five years longer than baby boomers did. This helps explain why the country’s home ownership is headed toward the 64-per-cent average for industrialized countries from 66 per cent in 2021.
Immigration is another factor – one to keep an eye on in the next three years as 1.45 million newcomers arrive in the country. RBC notes that immigrants typically rent for the first five to 10 years in Canada and represent a disproportionate share of rental households.
But renting isn’t just a landing spot for people who aren’t ready to buy or can’t afford to. Some people seem to appreciate the freedom of not having to pour time and money into a house.
RBC says boomers have nudged aside millennials as the fastest-growing rental demographic, and that growth was slightly higher in smaller cities than in large ones. Also, more seniors are renting. Almost a quarter of rental units were occupied by seniors last year, up from 19 per cent in 2011.
The rental market soaking up all this demand is an affordability wasteland. The national average one-bedroom rental jumped 16.9 per cent year-over-year in November to $1,722, according to Rentals.ca. In a dozen cities in Ontario and British Columbia, it was more than $2,000 per month, with Halifax trailing just behind at $1,957.
Driving these numbers is a classic mismatch of high demand and inadequate supply. There’s also some landlord greedflation in the mix, and some floundering investors who are jacking up rents to try to offset their rising mortgage costs.
It’s tempting to say that renting is an overheated mess right now, stay away. But home ownership is an impossible alternative for many people unless they compromise on the city where they live or co-buy a property with friends or family.
Also, it’s clear there’s a component of the rental market with the financial clout to pay the going rate. That would be boomers who cash out of their family homes with enough to comfortably rent for the rest of their lives.
The rise of renting in Canada should be something to celebrate – a sign of people breaking away from the groupthink that drove house prices to a ridiculous peak earlier this year. Instead, renting has become just like owning: inviting to a financially privileged few but unaffordable for many.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, December 14, 2022