Albertans lead country in mortgage mania

Magrath

Albertans lead country in mortgage mania
High-income earners doing most of the home-buying; renting the domain of the poor

! {3 z& L, C/ w, v# v! j5 C2 oAlexandra Zabjek
, c2 r+ A: O  i+ ~' W# s. S$ DThe Edmonton Journal

Saturday, May 26, 2007

EDMONTON - Rates of home ownership are rising more quickly in Alberta than anywhere else in the country, according to a Statistics Canada study released Friday.
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5 n2 L; h% T  w& o! [' s7 k/ vIn 1986, 39 per cent of Alberta households were renting, compared to 24.7 per cent in 2005, the steepest decline in the country. Nationally, almost 40 per cent of households were renting in 1986, compared to 31.2 per cent of households 20 years later, the report showed.

1 z0 a- ?* D$ w) n( s$ G+ TLow mortgage rates and a strong economy have helped more Albertans buy homes, said Don Little, a Statistics Canada economist who co-authored the study.

# x+ _7 O; J& T" F! KHowever, increases in home ownership have occurred most dramatically amongst the country's high-income brackets, leaving the rental market overpopulated with low-income households.

The report found that 40 per cent of Canada's renters fall within the country's bottom 20 per cent of income distribution. Twenty years ago, just one third of Canadian renters fell within the lowest income bracket.
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3 R$ M8 d" F: N9 [7 x) ]"The households that went from renting to owning in recent years tended to have higher incomes than the households that didn't," said Little. "By default, the people that got left in the rental market are now proportionally more comprised of lower income households."
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The demographic shift in Canada's rental population could impact the quality of rental accommodations, say some experts.
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2 {: s7 [3 V, k$ VSince the revenue potential from low-income renters is low, there is little incentive to build more rental stock or for landlords to invest in upgrading existing buildings, said Tom Carter, the Canada Research Chair in Urban Change and Adaptation at the University of Winnipeg.
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; G# K8 e3 d0 _: d& p% j9 x7 \6 X"We haven't seen much of a focus on building rental housing in the last 10 or 15 years and I doubt very much that we'll see any significant investment in rental housing in the future," said Carter, noting that most of the country's rental units were built in the 1960s and 1970s.

At the same time that Canada's renters are increasingly likely to come from low-income backgrounds, the diminishing rental stock is causing rents to rise, forcing renters to spend even more of their incomes on shelter.

Last week, for example, the Canadian Mortgage and Housing Corporation predicted that the average price for a two-bedroom apartment in Edmonton would rise to $1,115 per month in 2008.

: j1 f: V$ D7 R"We're really creating a deep poverty situation here," Carter said.

7 H& W! I" z6 K1 v, r" w2 fWhen households spend more than 30 per cent of their gross annual income on housing, there is less money for other essentials such as food, clothing and education. High housing costs can have a particularly harsh effect on certain segments of the population, such as refugees who arrive in Canada with little or no savings, he said.

/ _5 t' F4 r6 Z6 |8 U  O  NThe Statistics Canada report also showed that singles, city dwellers and residents of British Columbia and Quebec were more likely to be represented in the country's rental market.

9 Q! z5 ]' |$ V5 Tazabjek@thejournal.canwest.com
9 g. N  ~7 a$ v% B8 R8 c© The Edmonton Journal 2007