‘Bank of Mom and Dad’ plays bigger role in housing

More parents now co-own homes or co-sign mortgages

More than a quarter of Toronto homes owned by adults born in the 1990s are co-owned with their parents, Statistics Canada says — an acute picture of a countrywide trend, as property wealth flows between generations.

Across Canada, the new data shows Toronto’s 27.2 per cent co-ownership rate soaring past the 17.3 per cent rate across Canadian cities, and in stark contrast to the lower rates seen in more affordable locales like Moncton, N.B.

And it isn’t just a reflection of multi-generational set-ups, where adult children and aging parents cohabitate and split living expenses, analysts say.

The data also suggests a proliferation of parents co-signing their kids’ mortgages, a trend known to help priced-out young adults gain a toehold in the market.

Roughly three in every 10 homes owned jointly by a parent and child were found to be inhabited solely by the grown child, with the parents living in a different home they also owned.

The data also establishes links between parents who own higher-value residential properties and the value of their kids’ homes, with the grown children’s homes valued 29.6 to 37.4 per cent higher than their peers.

“You’re seeing this important way that wealth is transferred and passed down through generations,” said Matti Siemiatycki, director of the Infrastructure Institute at the University of Toronto who’s an expert on city policy and housing.

Siemiatycki noted even more young adults may have been aided by parents through financial contributions to a down payment.

The benefit of that kind of leg-up can extend through multiple generations, Siemiatycki said. When a parent helps their child break into the real estate market, they’re offering a lucrative asset, which that child can later leverage to help their own kids buy a home. “That will ripple, and it will just widen inequality between those who have that opportunity — and those who don’t.”

Across Canada, co-ownership is especially prevalent among immigrant families, the data agency noted — making up about half of the co-owning parents countrywide and more than 80 per cent in Toronto. To explain the trend, the agency pointed to past research, which found immigrant families more likely to use their savings on housing compared to other investments.

Meanwhile, some trends were unique to Canada’s white-hot markets of Toronto and Vancouver. In each city, there was a higher number of ’90s-born homeowners holding high-value homes despite low incomes, the data shows.

“These would be cases where, in all likelihood, there is a large amount of wealth or support being given to children,” researcher Josh Gordon said.

Across cities, the research team found locations with higher home values tended to correspond with higher rates of parental-child coownership. Where cities like Toronto, Vancouver, Guelph and Oshawa had rates over 20 per cent, Halifax’s rate was only 9.1 per cent, and Winnipeg’s rate was 14 per cent.

Like Siemiatycki, their team sees their findings as laying bare the advantages available to children whose parents were previously able to buy real estate.

“These results suggest that parental property ownership affects not only children’s ability to access home ownership as adults, but also the value of the properties they own and, therefore, their ability to build up greater home equity and financial assets,” the agency wrote alongside its findings.

And as affordability wanes in cities across Canada, its team believes the trend could widen. “Higher housing prices will also correspond to greater parental housing wealth, which may allow parents to support their children’s home ownership aspirations through forms of co-ownership,” they wrote.

As of March, Toronto Regional Real Estate Board data shows the average home sale in the GTA came with a $1.1-million price tag. Although prices have fallen since the pandemic peak, a recent analysis by the Star’s Clarrie Feinstein found that higher borrowing costs have rendered home ownership even more expensive — with monthly carrying costs about 30-per-cent higher now.

In recent months, Statistics Canada has examined the long ripples of home ownership for subsequent generations through the specific cohort of young adults born in the ’90s.

In November, the data agency released their first set of data showing that cohort’s likelihood of owning a home jumped if their parents owned property.

The data being examined, drawn from tax filings and housing records, quantifies what has long been suggested anecdotally — that especially in Canada’s most expensive urban centres, the “bank of mom and dad” can make or break someone’s ability to own residential property themselves.

‘‘ (Co-ownership) will just widen inequality between those who have that opportunity — and those who don’t.

MATT I SIEMIATYCKI DIRECTOR INFRASTRUCTURE INSTITUTE AT THE UNIVERSITY OF TORONTO