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William Watson: Some surprising numbers on wealth and home ownership

Despite what you've heard, the wealth gap is narrowing, while people under 35 are more likely to own a home than at any time this century

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How long, I wonder, before the political problem of the day switches from housing affordability to the awful, terrible, savings-destroying nationwide decline in house prices? Already there are signs. This week CBC’s The National ran a piece about sluggish markets and declining average sale prices on news that February housing sales were down from a year ago (though snow and cold could be partly why).

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Experts consulted used terms like “concern,” “sluggish” and “weak.” For the last five years, it seems, the main goal of public policy has been to get more Canadians into homes. But now that prices are finally plateauing and maybe even coming down — Toronto’s condo market is basically dead, apparently — what happens? People start worrying about it. Higher housing prices are bad but lower housing prices are bad, too. Every change is for the worse, as a Joseph Heller character once put it. All those boomers whose main retirement nest egg is their now-empty nest see their embedded savings eroding and don’t much like it. Raze, baby, raze: maybe we could let the military practice new drone-powered destruction techniques by taking out soon-to-be-surplus residential infrastructure. Nothing like cutting supply to keep prices reassuringly firm. Ask the milk and egg people.

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Further evidence on such matters comes from a nicely contrarian TD Economics report by researcher Mekdes Gebreselassie, who finds that — despite everything you’ve read anywhere — the wealth gap between the wealthiest 20 per cent of Canadians and the bottom 40 per cent has closed in recent years. Moreover, wealth has grown seven times more quickly in families where the main income-earner is under 35 years of age than in those where he or she is 35 years or older. Of course, under-35s usually have less wealth to begin with so larger percentage gains are easier. But seven times faster, as any F1 driver will tell you, is an effective way to catch up.

What caught my eye in this study were the data on home ownership, which is higher now among people under 35 than it has been at any time in this century. Much higher, in fact. In 2023, the latest year for which data are available, it was 45 per cent. Its average for the century’s first two decades was (eyeballing one of the study’s charts) just 35 per cent.

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As an OK Boomer, I can never remember which generation is which — millennials or Gen X or Z — but whichever generation the under-35s are their home-ownership rate is substantially above what it has been in recent years.

Granted, as Ms. Gebreselassie notes, under-35s are older than they used to be. A larger share are 32, 33 and 34, the ages where many people start thinking seriously about houses. It’s also true that more young buyers — about one in six — are getting downpayment help from their parents.

Some people regard resorting to the Bank of Mom & Dad as somehow cheating. It may well reduce intergenerational mobility between income classes, other things equal. But: it’s only one in six, and when have parents not helped kids with down payments? One difference now is simply that, by dint of work, luck and saving, we boomers are richer than previous generations so there’s more wealth to hand down.

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In any case, Gebreselassie ends her study by asking why feelings about affordability don’t seem to match the numbers. Her answer is mainly that despite their higher rate of home ownership, younger Canadians don’t have high net worth so feel vulnerable. But it’s part of the great circle of financial life, isn’t it?, that young people typically have minimal net worth but build it up by saving, including by paying off their mortgage.

I’d add a couple of other possibilities. It doesn’t help when no one in public life will say to an aggrieved interest group suffering an alleged crisis, wait a second, let’s see if the numbers really do back up your case. It will also be interesting to see, as things play out, whether young people’s higher rates of home ownership have been artificially inflated by the proliferation of public programs designed to help out first-time homebuyers. The U.S. housing collapse of 2007-8 and the carnage it brought are widely thought to have resulted from excessive lending to people who really weren’t in a position to finance a home.

I’ve been looking at the data on income inequality recently. Since about 2000, the “Gini coefficients” — the most common measures of inequality — are basically flat for all the standard definitions of income. They did rise in the 1990s, indicating growing inequality. But since then: either flat or maybe even down a tad. If you look at the shares of the top 10 per cent of earners, the infamous top one per cent, and even the gilded slivers that constitute the top tenth of a per cent and top one hundredth of a per cent of income-earners, same thing: Basically no change this century in their shares of income.

Mark Carney’s now-famous Davos speech said systems of belief fall when people start telling the truth. The actual numbers on wealth, housing and inequality tell quite a different truth than you hear in public debates about such things.

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