COVID’s economic pain not evenly spread in Canada
People in construction, retail more likely to have sought mortgage deferral last year
The evidence is growing that the impact of the COVID recession has been far from equal.
Tuesday, the Canada Mortgage and Housing Corporation released a study showing that people working in the construction, retail and services industries were more likely than other Canadians to have sought a mortgage deferral last year.
The study also found that on the flip side, education, health-care and government workers were less likely to have asked for a deferral.
“Borrowers working in some industries were less resilient than others,” said the report.
While mortgages held by people working in construction are 9.9 per cent of the standard homeowner mortgages insured by CMHC, construction workers accounted for 12.6 per cent of deferrals. There was a similar overrepresentation in services (20.4 per cent vs. 23.2) and a smaller but still significant one in retail (5.2 vs. 6.3).
Not coincidentally, the study pointed out, those are three of the sectors which had the biggest job losses during the first wave of the pandemic.
There was also an uneven geographic spread to the deferrals, the CMHC found. Alberta was heavily overrepresented; Canada’s biggest oil-producing province accounted for 18.6 per cent of mortgages insured by CMHC, but 26.4 per cent of referrals. Ontario, in contrast, accounted for 25.7 per cent of mortgages, but just 19.9 per cent of deferrals.
The numbers, say economists, show just how unevenly the economic havoc wreaked by COVID has been spread.
“This shows sector by sector and region by region where the pain is,” said Tony Frost, an associate professor of business, economics and public policy at Western University’s Ivey School of Business.
Frost added that the economic impact is even grimmer than the CMHC’s numbers might suggest, because homeowners are typically in a better financial position than people who don’t own their homes.
“Think about how many people in the retail and service industries simply aren’t even in a position to own a home and have a mortgage. And they’re probably the hardest hit,” said Frost. “This isn’t a total snapshot. The full one would be even more extreme.”
The CMHC’s report should also dispel concerns from some critics that even people who didn’t need mortgage deferrals had gotten them, said David Macdonald, chief economist at the Canadian Centre for Policy Alternatives.
“Last year, there were some people saying that everyone was applying for deferrals whether they needed one or not. This shows that wasn’t the case. People applied if they needed one,” said Macdonald. “Unfortunately, there’s a sentiment
in some circles that you’re inherently trying to scam someone if you apply for assistance.”
By the end of March last year, roughly 17 per cent of homeowner mortgages insured by CMHC had payments deferred. By September, just over seven per cent of mortgages were being deferred.
Macdonald added that the economic toll could have been
far worse if the housing market hadn’t kept rising last year.
“One of the things that we haven’t really seen is an increase in defaults. … If people had applied for deferrals and then found themselves under water because the price of their homes had gone down, this would be a much different situation,” Macdonald said.
The CMHC report is just the latest bit of evidence of the uneven
spread of the economic pain caused by COVID. Last week, a report from CIBC found that people in temporary work, older workers and lowwage workers were far more likely to have lost their jobs in 2020.
At the time, CIBC’s deputy chief economist Benjamin Tal called it “the most asymmetrical recession in Canadian history.”