Why an increase in mortgage-free young people is a worrisome sign

Globe and Mail

a day ago

'Generation Z is unprecedentedly rich.' That was the bold headline of a recent Economist article, drawing on international data showing many young adults today financially outpace boomers when they were the same age.
Since I often report the opposite for younger Canadians, the claim gave me pause. So, I revisited national data on income, unemployment and home ownership for those aged 20 to 34. Canada tells a different story from the Economist headline, except for one notable trend: home ownership among young adults surged during the pandemic.
This raises a deeper concern. Canada may be drifting from a meritocracy (albeit an imperfect, and often tilted toward white men, meritocracy) toward a landed aristocracy, where access to secure housing increasingly depends on being born into the right family.
The concern doesn't show up in income data. In 1976, when most boomers were young adults, the median full-time, full-year earnings for 20- to 24-year-olds was $43,800 in today's dollars, according to Statistics Canada. The contemporary figure is slightly lower at $41,400. For 25- to 34-year-olds, median earnings dipped from $64,400 in 1976 to $62,500 today.
But things shift when we turn to housing.
I combined data from Statistics Canada's surveys of consumer finance and financial security, along with five-year mortgage interest rates with average price data from the Canadian Real Estate Association. The result is telling.
In 1977, 41 per cent of Canadians under 35 owned a home. The average house cost $253,000 (in today's dollars), it took five years of full-time work to save a 20-per-cent down payment and mortgage rates averaged 10.75 per cent.
By 2019, home ownership for young Canadians had dropped to 36 per cent. The average home (now more often a condo) cost $598,000, and it took 13 years to save the down payment. Lower interest rates around 4.6 per cent made carrying a larger mortgage more manageable.
Then came the pandemic.
As emergency-level interest rates fell to around 3 per cent for 5-year fixed mortgages, home prices soared to $789,000 in 2021 before easing to $700,000 in 2023. Despite the sharp rise in costs – and the 14 years now needed to save a 20-per-cent down payment – home ownership among Canadians under age 35 jumped to 44 per cent, the highest level in five decades.
That surge is striking when compared to older peers, whose home-ownership rates remain below historical norms. Among 35- to 44-year-olds today, just 63 per cent own a home – 10 points lower than the same age group in 1977.
One clue behind the surge in home ownership among Canadians under 35 stands out: in 2023, 18 per cent of young homeowners reported having no mortgage. The only time this figure was higher was in 1984 – when home values were a third of today's, and interest rates were three times as high.
Since 1977, the net value of Canadian principal residences – the total worth of homes minus outstanding mortgages – has grown by $1.5-trillion, after adjusting for population, economic growth and inflation. Canadians over 55, who represent just 30 per cent of the population, captured 60 per cent of that windfall.
During the pandemic, record-low interest rates allowed many older homeowners to liquify their housing wealth through refinancing. The data – particularly the number of mortgage-free young people - suggest some may have used that wealth to help younger family members enter the market.
At the family level, it's a beautiful act of intergenerational love.
At the societal level, it's deeply troubling.
Because entering the housing market increasingly depends on how much housing wealth your family has accumulated – not how hard you work. That's the textbook definition of a landed aristocracy.
This trend is already driving a sharp divide among younger Canadians. The median net worth of homeowners under 35 is $457,000. For their peers who rent, it's just $44,000.
In my last column, I called for a national task force to confront a question too many politicians dodge: should home prices rise, stall or fall? That same task force should also take up a related challenge – how to address the growing housing wealth divide between generations, and now increasingly within them.
If we believe Canada should reward effort over inheritance, then we must face a hard truth: our housing system is failing the meritocracy test.