Renters left behind as rising costs push them to "dissave"
Canadian renters are facing increasing challenges in wealth accumulation, according to new analysis from RBC.
RBC economist Carrie Freestone said the difficulties faced by renters in today’s market is barring them from home ownership, which is a key avenue for building wealth in Canada.
In her analysis, Freestone noted that “nearly half of Canadian wealth accumulation has been driven by homeownership for the past three decades.”
Homeowners have seen their net worth increase from nine times their disposable income to 13 times since the final quarter of 2010.
During the same period, renters saw a much smaller growth in net worth, going from three times to 3.5 times their disposable income.
But renters did experience a period of financial reprieve during the pandemic, when government grants and reduced spending opportunities led to a surge in household saving.
By the second quarter of 2020, the savings rate for Canadians renting their primary residence peaked at 22% of household disposable income, just slightly below the 24% savings rate of homeowners.
The tide turned in the third quarter of 2023, as both groups saw declines in net wealth, with renters bearing the brunt of the impact.
And this drop in pandemic-accumulated wealth has led renters to dissave – spend more than what they earn each quarter.
In 2023, renters’ expenditures exceeded their disposable income by nearly 9%, whereas homeowners managed to save 7% of their take-home pay.
“Renters dissave to a greater extent because they are grappling with higher living and debt-servicing costs, making saving for a down payment harder than ever,” said Freestone. “Only about one-third of Canadian income earning households earn enough to purchase a single-detached home on their income alone.”
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