Many young people across Canada are starting to realize that it will be difficult for them to live the same lives as their parents did. It is no longer a guarantee that by going to school and working hard, you could be reasonably sure to one day afford a home to comfortably raise a family in. This change in opportunity has unfolded in a single generation and is leading to national protests calling on politicians to address the housing crisis. The data shows that these concerns are well-founded, with the ratio of home prices to income rising rapidly over the past decades. Home prices becoming a larger and larger multiple of income levels means that is increasingly difficult to save for a down payment or afford monthly payments, blocking many who don't have access to parental assistance from homeownership.
While most people recognize the challenge that soaring home prices are posing to young people, not many are talking about how these circumstances are likely widening the racial wealth gap. Per Financial Post, the Bank of Canada's Governor, Tiff Macklem, recognizes the wealth inequality issues caused by soaring home prices. Macklem admitted at a conference that the Bank of Canada's monetary tools being used to address the COVID-19 pandemic could widen wealth inequality by boosting asset prices that are not distributed evenly across society. As always, the Bank of Canada will be "watching this closely".
It is clear that the ownership of assets such as housing is not distributed evenly across society, and data from our neighbours to the south can give us clues in regards to homeownership by race. The United States Census Bureau reported the following homeownership rates as of June 2021:
All other races: 56.2%
The above rates have been fairly consistent since they were first tracked in 1994. There is very little public data regarding homeownership or wealth distribution by race in Canada, but the U.S. homeownership rates give us a rough idea of how large the gap may be. If we look at the latest income statistics from Statistics Canada's 2016 census, we can see clear gaps in regards to employment income and investment income:
Racialized men earn 78 cents for every dollar earned by white men, and racialized women earn 87 cents for every dollar earned by white women.
25% of racialized people earned investment income (8% earnings capital gains) compared to 31% of non-racialized people (12% earnings capital gains). The average amount of capital gains were 47% higher for non-racialized people.
Based on the limited available data, we can assume that Canada has a similar problem as the U.S. where homeownership is far from evenly distributed by race. Per Statistics Canada, real estate as a share of total assets (across all households) was 41.3% in 2019, representing the largest component of an average household's wealth. Per CREA, the national benchmark home price increased from $590,300 in June 2020 to $734,500 in June 2021, for a gain of $144,200 (+24%). This gain in a single year is more than double the 2019 median after-tax income of Canadian families and unattached individuals of $62,900. Many homeowners have profited immensely since the start of the pandemic but also going back the past several decades.
The current government has been very vocal regarding racial issues in Canada, yet has been silent on the impact of soaring home prices on the racial wealth gap. The unfortunate reality is that given how significantly home prices are rising, other programs and efforts to address the racial wealth gap are likely being dwarfed. While the Bank of Canada did admit that its policies could cause wealth inequality, this came in May 2021 (over one year after its quantitative easing program was introduced) and it has not adjusted its policies as a result. Policymakers need to be far more transparent around the impacts of their policies, and Canadians deserve an answer as to whether the actions taken during the past year have contributed to further widening the racial wealth gap. Canadians also deserve to have access to better data regarding homeownership so they can understand how policymaker decisions impact their lives.