Douglas Todd: It’s a problem when kids whose parents don’t own homes end up with far less – Vancouver Sun

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Opinion: What happens to equality when young adults who don’t have homeowner parents are far less likely to be able to buy a dwelling?

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It’s not every day you are cited in the introduction to a Statistics Canada study.

But that’s what happened this week when a new report by housing researchers at the Crown corporation highlighted my 2021 column, titled Canada’s ‘bank of mom and dad’ returning us to 19th-century inheritance culture.

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In their ground-breaking study of a disturbing trend toward inequality in Canada, Michael Mirdamadi and Aisha Khalid discovered young adults who have parents who own their home were twice as likely to own a home themselves.

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It is now a big disadvantage in Canada if you don’t have parents who own a dwelling, a phenomenon examined in my earlier column. It explored the views of famed French economist Thomas Piketty on the growing chasm between those who live on accumulated wealth and those who get by on wages.

The Statistics Canada’s article, titled Parents and Children in the Canadian Housing Market, confirms an unsettling development for a liberal democracy such as Canada, which aspires to reward work and merit and, however imperfectly, offer equal opportunities to everyone.

Specifically, the StatCan study found “people born in the 1990s whose parents were homeowners were twice as likely to own a home in 2021 than those whose parents were non-homeowners.”

The gap grows even wider if parents own more than one dwelling, regardless of whether they are cabins or investment condos. “The adult children of multiple-property owners were nearly three times more likely to be homeowners in 2021 than those whose parents were non-homeowners,” write Mirdamadi and Khalid.

Unfortunately, for young people in B.C., the rate of home ownership is lowest in this West Coast province for those born in the 1990s, who would now range in age from the early 20s to early 30s.

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Only 14.4 per cent of young-adult children in ultra-expensive B.C. own a property. That compares to 20.5 per cent in New Brunswick and 18.4 per cent in Manitoba. The national ownership rate for this age group is 15.5 per cent.

“This has led to a growing concern about intergenerational inequality and the rise of an ‘inheritance culture,’” Mirdamadi and Khalid write, citing my column.

“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.”

Statistics Canada study shows young-adult children of parents who own homes are much more likely to buy a property. Their chances rise in proportion to how many properties their parents own.

The authors are referring to the way Piketty’s surprising bestseller, Capital in the Twenty-First Century, describes how the rate of return on capital, such as that controlled by people who own property, exceeds the growth rate of wages and the economy as a whole.

So, when a family’s fortune is passed down through gifts and inheritance, Piketty maintains it produces a class of economically privileged people. Meanwhile, those who don’t have wealth passed to them increasingly end up being left behind.

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Journalists corralled Housing Minister Sean Fraser about the Statistics Canada study, which indicates its importance. Fraser started out saying people who “choose” to enter the ownership market shouldn’t be limited by their parents’ real estate portfolios.

“One of the things that’s essential to me is your ability to succeed in Canada shouldn’t depend on how much money is in your parents’ bank account,” he said in the House of Commons.

Still, despite Mirdamadi and Khalid spotlighting an Ipsos Reid poll from this year showing that almost seven in 10 Canadian tenants believe “owning a home is now only for the rich,” Fraser went on to emphasize, somewhat tone deaf, how renting has been good for him.

“We shouldn’t discriminate against the idea that a person can have a full life if they choose to rent. For a period of my own life renting was exactly what made sense for me,” said Fraser, 38. “The reality is that some people for their entire lives, some people for a portion of their lives, find that renting a place is exactly what they need.”

The housing minister also talked about how the government this April brought in the first home savings account, which allows people to save tax-free to buy a dwelling. The Liberals proposed more housing efforts Tuesday. But for many it will be too little, too late.

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“The reality is that some people for their entire lives, some people for a portion of their lives, find that renting a place is exactly what they need,” Housing Minister Sean Fraser told reporters this week, in response to a Statistics Canada report showing young people without homeowner parents find it much harder to buy. Photo by Justin Tang /The Canadian Press

Even before the Liberal party first took power in 2015, Vancouver and Toronto developers and realtors were urging desperate first-time prospective home homebuyers to access “the bank of mom and dad” for a down payment. They correctly predicted it would be the future of many Canadians’ housing hopes.

It was the real-estate industry’s response to an unaffordability crisis UBC geography professor emeritus David Ley captures in his new book, Housing Booms in Gateway Cities, which looks into how the unparalleled movement of transnational capital into cosmopolitan Vancouver, Sydney, Hong Kong, Singapore and London helped lead to skyrocketing housing prices and rents.

In recent decades, as a result, many Canadians who owned a dwelling suddenly saw its value skyrocket. But those without parents making windfall profits on their “asset” suffered, as did recent immigrants who arrived in Canada without a great deal of money.

In an interview, Mirdamadi said he and Khalid pursued this first-of-its-kind family study of housing data because of other research showing overall home ownership rates had dropped by several percentage points since peaking at 69 per cent in 2011.

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The authors found the share of first-time home buyers who received a financial gift from family has risen to 28 per cent from 20 per cent in 2015. The size of the offering from “the bank of mom and dad” has also jumped, to $80,000 from $50,000.

The skewed practice only seems to be accelerating. As Jonathan Cooper, president of Vancouver’s Macdonald Real Estate Group, recently said, “The bank of mom and dad is a factor in the majority of transactions. We’re in the midst of an unprecedented transfer of wealth.”

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  1. There are a raft of inheritance novels from the 1800s, such as Jane Austen’s Pride and Prejudice, Fyodor Dostoyevsky’s Brothers Karamazov and Anthony Trollope’s The Belton Estate. They often involved the passing on of great wealth through property. Is there another way?

    Douglas Todd: Canada’s ‘bank of mom and dad’ returning us to 19th-century inheritance culture

  2. Rich Coleman, the B.C. Liberals' former minister responsible for housing (foreground), went so far as to make “the remarkable claim” that Vancouver prices were “pretty reasonable,” says the author of a new book on housing booms in gateway cities. Meanwhile, Coleman's party accepted far more donations from the development industry than any other sector.

    Douglas Todd: The Wild West in housing is mostly over, but the devastation goes on

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