As the cost of homeownership in Canada soars, one economist says many unable to afford a home may miss out on a primary driver of wealth accumulation.
On Thursday, Carrie Freestone, an economist at RBC, said in a report that renters are facing barriers to accumulating wealth as they spend more and more of their income on shelter. Freestone said in an interview with BNN Bloomberg on Friday that renters “are squeezed” and spending more than they earn. She said the trend is cause for concern.
“I will say that if we look at wealth accumulation, homeownership has been the primary driver of wealth accumulation in Canada,” Freestone said.
“It's accounted for half of the assets accumulated over the past three decades. So it is concerning that renters are not having access to the housing market.”
She said that homeownership is often a “nest egg,” whereby if people can pay off most of their mortgage by the time they retire they have “something to fall back on.” Freestone said this gives a person security in retirement as they can sell their home, downsize or live off the equity in their home.
“We just don't have an investment vehicle that's equivalent when we think about the pace of asset accumulation or appreciation that we've seen,” she said.
The solution to the problem, Freestone said, lies in addressing housing affordability in Canada by building more homes, which is “easier said than done.” She outlined that there are capacity constraints regarding the construction sector.
With files from The Canadian Press.