Thursday, May 19, 2011

How Many Canadian Households Own Without A Mortgage?

The trend has been downward, worrisomely. This population provides stability to the system by not locking up capital that would be better used in actual economically productive sectors. They also have more spending money to boost the consumer economy.

2006 Census: Changing patterns in Canadian homeownership and shelter costs
More homeowners with a mortgage

Nearly 6 out of every 10 households that owned their home had a mortgage in 2006.

Of the 8.4 million households that owned their dwelling in 2006, 4.9 million, or 57.9%, had a mortgage, the highest level since 1981 when baby boomers were entering the housing market. This was an increase from 55.2% in 2001. At the same time, the proportion without a mortgage fell from 44.8% in 2001 to 42.1% in 2006.

Most of the increase in the proportion of households with a mortgage was due to renters moving into homeownership, but some can only be accounted for by homeowners taking on new mortgages or adding to existing ones, possibly to finance renovations or other large purchases.

Provincially, Alberta had the highest proportion of households with a mortgage (62.1%) and Newfoundland and Labrador had the lowest proportion (44.8%).
That's 3.5 million mortgage free households of out of 12.4 million total households. Putting the mortgage free/rent free at 28.2%

In the most recent CAAMP survey there is this:
Profile of Mortgage Holders
There are currently about 9.45 million home owners in Canada, of whom about 5.7 million have mortgages. An estimated 3.75 million home owners are mortgage-free, although they may have other forms of debt.
If the homeownership rate is 70%, that means there are now 3.75 million mortgage free households out of 13.5 million total households. Putting the mortgage free/rent free percent at 27.8%

Based on the CAAMP data, at least, the number has not declined significantly. The next census will be a better comparison.

Added: Later on in the CAAMP report is this little bombshell.
Some of the mortgage-free home owners (750,000 to 800,000) have Home Equity Lines of Credit (known as “HELOCs”).
Some? 21% is not some. It's a significant minority.


jesse said...

21% of people without mortgages have HELOCs? Someone needs to google "disingenuous".

jesse said...

"mortgage free/rent free"

Speaking from experience, owning property is not "free". You may not pay rent to a landlord or a bank but there are taxes, ongoing maintenance, and eventual capital replenishment that are effectively forms of rent.

GG said...

True. Taxes and upkeep are forms of rent. But I would argue you pay those no matter what, even if you are renting from a landlord those other costs are built into the rent. Unless your landlord is some kind of charity or is a clueless accidental landlord.

I suppose the main difference is the risk of a large repair bill is spread out across multiple units/renters in the typical renter scenario. Whereas a single homeowner with no mortgage runs the risk of a large outlay of maintenance rent. (Renting from nature, I'd call it, given the susceptibility of the materials we are using.)

jesse said...

"those other costs are built into the rent"

Yes that's the point: if you're a homeowner you pay yourself plus take on the risk of major events that a renter does not. Normally a renter pays for this by funding future capital costs but these days it's the opposite: the owner who bought at high prices is in effect funding the tenant by taking on unfunded liabilities that can only be funded by having prices appreciate since the revenues are so low. Let's put it this way: how many landlords do you think have an accruing capital account, how many throw capital cost allowances into general revenue, and how many even bother to show depreciation on both sides of the line?

The "rent push" argument is not valid IMO, simply because in total renters cannot afford significantly higher rents, nor do they have to due to competition from other landlords. We know this is generally true because rents are not increasing quickly, even in jurisdictions with rental caps (where rents are increasing less than the maximum allowable).