How much difference does the Bank of Mom and Dad make when it comes to home-ownership in British Columbia?
Quite a bit, at least it can if Mom and Dad own property themselves, according to a new study from Statistics Canada.
“(When) controlling for adult children’s age, income and province of residence, parents’ property ownership is strongly associated with an increased likelihood of home-ownership for their adult children,” reads the Nov. 20 study.
Just over 14 per cent of adult children born in the 1990s owned homes in B.C. in 2021, the lowest rate in Canada, according to the study. Home-ownership among this group varies, with one key factor being whether their parents own property themselves, as well as their income.
Less than 15 per cent of adult children born in the 1990s with incomes below $40,000 own homes across Canada if their parents own one home. That figure drops to 8.4 per cent if their parents do not own property themselves. On the upper end of the income scale, 51.6 per cent of 90s children have their own homes if they earn $80,000 or more. That number goes up to 61.6 per cent if their parents own three or more properties.
The effect that home-owning parents have on their own children appears to be particularly strong in B.C.
Four out of 10 adult children who earn $80,000 or more, but with parents who do not own homes themselves, own homes. That rate jumps to more than six out of 10 for children with parents who own three or more homes. Nowhere is this jump more pronounced than B.C.
“This may signal that in housing markets with higher property values, where higher incomes are necessary for ownership, parents’ property ownership or wealth plays a larger role in their adult children’s home-ownership outcomes,” the Statistics Canada study reads.
In other words, home-ownership in B.C. increasingly not only requires high incomes, but also well-off parents.
Those with middle incomes may feel themselves increasingly squeezed.
Just three out of 10 adult children (29.2 per cent) born in the 1990s with incomes between $40,000 and $80,000 own homes, almost 15 points ahead of people with incomes below $40,000, but almost 30 per cent behind those who earn more than $80,000, the biggest difference being the rate of home-ownership among their parents.
As the study notes, these findings largely match the findings of sociologists and economists, who study the influence of transfers among generations, starting but not ending with wealth. Other transfers include things like skills gained only in certain social environments and personal connections.
“Studies have found that the adult children of homeowners experience several advantages in relation to home-ownership compared with the adult children of renters,” the study reads. “The adult children of homeowners are more likely to receive a down payment as a gift and transition to home-ownership sooner.”
The study adds that children of home-owners are also likely to purchase higher-end homes, which then sets up children in the future.
“Inequality of home-ownership appears to be reproduced across generations as parents’ property ownership conveys significant financial advantages to their children,” it reads.
In other words, inequality now produces inequality later with the effects “strongest in housing markets with less affordability, weaker rent controls and less stringent mortgage lending conditions.”