Homes are hard to come by throughout much of Canada, or at least at the affordable price point buyers would prefer. But the housing shortfall is turning out to be quite the windfall for landlords and people who have space available for rent, according to a recently released survey.
On average, Canadians who own rental property pull in approximately $2,200 each month, a new study from the Canadian Imperial Bank of Commerce found, or what translates to 50 percent more than their costs.
The same is true for people who may not own separate rental property but have space that they're willing and able to let out for renters. In doing so, they lower their housing costs an average of 70 percent, the CIBC revealed.
Jamie Golombek, managing director of tax and estate planning at CIBC Financial Planning and Advice, indicated that the rental market is successfully serving as a means of earning additional income, particularly for people who may be just starting out or have growing families to feed and support, like millennials.
"While most homeowners believe the tax benefits alone make an income property a worthwhile investment, it's critical to understand how it fits into your overall financial plan, and be mindful of all of the tax implications of going this route so you can make the most of the venture," Golombek explained.
1 in 4 Canadians are landlords
Tax effects aside, it's clear that many Canadians are all aboard the rental property train. CIBC found that when including those who are already landlords with those who plan on letting out space but haven't just yet, approximately 26 percent of homeowners in Canada are in the rent market, meaning they own property and sell it to renters . More specifically, among current landlords, 66 percent own one or more investments properties that they use for rental purposes exclusively. They believe it's worth it, too, as 72 percent of respondents agreed with the notion that real estate is a smart way to earn supplementary money.
Real estate investor and television personality Scott McGillivray told CIBC that young people are striking while the iron is hot, understanding the financial advantages that come from sharing space.
"There's definitely a shift in attitudes and a growing interest in income properties, in part driven by a desire to offset high housing costs, but also because it can be a smart way to create extra income and build wealth," McGillivray stated.
One-quarter of Canadians spend at least 30 percent of income on housing
Homeownership doesn't come cheaply, particularly for those who are looking to buy or who have recently. Indeed, according to the most recent figures from the Canada Real Estate Association, the average house sold for $495,000 in April. For those who already own, roughly a quarter of the population devote 30 percent or more of their salaries toward household expenses, including rent, based on the most recent Census data obtained by Statistics Canada.
Lofty asking prices and costs of living are part of the reason for the relative dip in homeownership versus 5 to 10 years ago. Currently, slightly more than two-thirds of the nation's households – 67.8 percent – own, based on Census data. That's down from 69 percent in 2011 and 68.4 percent in 2006. However, the homeownership rate today is higher than back in the early 1990s, when it hovered at 62.6 percent.
Graham Haines, research and policy manager at the Ryerson City Building Institute in Toronto, told The Canadian Press that with renting now more common, it's important to take stock of what renters are interested in as a potential living space.
"We have to start thinking about – if rent is going to start becoming a more important part of our real estate sector once again – how we make sure we're building the right type of rental, rental where we need it and rental that's affordable for the people who are going to be using it," Haines said.
While real estate supply as a whole is low, it's slowly but surely making a comeback, particularly among rental units. A seasonally adjusted annual rate of 225,696 units broke ground in April, according to the Canada Mortgage and Housing Corporation. CMHC Chief Economist Bob Dugan noted the lion's share of these housing starts were multi-unit dwellings.