The housing experiences of new Canadians: Insights from the Longitudinal Survey of Immigrants to Canada (LSIC)

2. How much do immigrants spend on housing?

2.1 Introduction

As mentioned earlier, under traditional theories of immigrant integration, newcomers are expected to be increasingly indistinguishable from their host society over time, due to a ‘give-and-take’ process that brings them closer to the host population. That is not to say that immigrants won’t experience some difficulties upon arriving in a new country, or that they will become entirely indistinguishable from Canadians overall, but that they are likely to encounter challenges inherent to navigating a new labour market, housing market, society, etc. What is central in these accounts is that initial difficulties do not persist beyond this transition period. Over time, challenges will subside, and immigrants will increasingly enjoy access to the benefits that other Canadians enjoy, including a ‘comfortable home in a good neighbourhood’ (Murdie and Teixeira 2002).

As also mentioned earlier, several scholars question the prospect of equal opportunity and attainment as a universal endpoint, arguing instead that, no matter how much time elapses, some groups never fully converge with mainstream society (Murdie et al. 1999; Lee and Bean 2004; Hulchanski 1993; Henry et al. 2000). They instead argue for segmentation, where groups experience different modes of incorporation or contexts of reception based on their physical characteristics (Portes 2005; Boyd 2003; Myles and Hou 2004).

As segmentation relates to housing, the means by which markets are restricted could range widely, but may include higher mortgage cut-offs (Gyourko, Linneman, and Wachter 1999), inflated house prices (Henderson and Ioannides 1986; Ihlanfeldt 1981), or restricted or channelled housing markets (Yinger 1998, 1986; Galster 1990). Although the mechanisms for limiting opportunity could vary widely (and most derive from US research), the outcome will be the same: a lack of convergence with Canadians overall.

With this literature as a backdrop, the primary focus of this section is to elaborate on how much immigrants spend on housing (owned and rented) in Canada, and how this changes in the first four years of settlement. The primary guiding questions for this section are as follows:

1. How much do immigrants pay per month in rent/housing costs (e.g., as a proportion of household income)? Does this amount (as a proportion of household income) increase or decrease with time spent in Canada?
2. Does this vary by location? Visible minority status? Country/Region of origin? Category of admission? Level of education? Age?

2.2 How much do immigrants pay per month in shelter costs?

For immigrants and the Canadian-born alike, housing is likely one of the largest expenses that households incur on a continual basis. Given this, and that housing is a basic necessity, households must dedicate a portion of their financial resources to housing. The differences that exist stem from the amount spent on housing, and the type of housing that is used, not whether or not an immigrant household chooses to spend money for accommodation.

At the same time, housing is a fixed entity, and the amount a household chooses, or is able to, to spend on housing partially determines their access to amenities, the quality of their surroundings (schools, parks, community organizations, etc.), and the people they come into contact with. Consequently, it is useful to identify how much immigrants spend on housing, because it serves as an indicator of their social and economic position in Canadian society. Looking at trends over time allows for an assessment of how this positioning evolves. Table 2-1 provides this information for LSIC respondents across the observation period.^{Footnote 8}

Table 2-1: Median monthly shelter costs ($2002), LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars

This table shows that there is a steady increase in housing costs over time (all values are stated in 2002 dollars), suggesting that immigrants are gaining access to better amenities as their time in Canada increases.

The potential explanations for the increase over time are multiple, but a leading contender for rising shelter costs is the more than doubling of home ownership rates over the period. This table shows how quickly many immigrants are able to move into a dwelling they own, with home ownership rates of 50.8% after only about four years in Canada. This impressive acquisition rate is actually faster than it was in the past (Haan 2007), and suggests that many immigrants are deftly navigating the Canadian housing market.^{Footnote 9} The implications of this trend are further discussed later in the conclusion of this section.

Table 2-2: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars

This movement into ownership is especially remarkable when the cost differences between owning and renting are considered. Table 2-2 shows that households living in rented accommodations spend roughly half of what those that own do at all points in time. Although the cost waxed and waned over the four-year period, and ended lower than it started, the relative cost of renting versus owning were fairly constant over time. As such, the transitions to ownership were not based purely on immediate economic considerations/affordability issues — if they were, more LSIC respondents would have remained renters, since the initial savings margin was carried forward entirely over time.

For renters and owners alike, however, it is difficult to speculate on how much tenure choice really costs without also looking at income. Accompanying wealth and savings also play a part in this assessment. If the increase in shelter costs for owned dwellings occurred alongside substantial increases in income for homeowners, for example, then the relative costs for renters may have actually increased over time compared to owners, despite the relative stability shown in Table 2-2.

Unfortunately, the LSIC does not contain consistent monthly income information for respondents. For wave 1, respondents reported the income they earned between their landing date and interview date, whereas in waves 2 and 3 they reported their income for the previous 12 months. By dividing the wave 1 figure by the number of months a respondent has been in Canada, and dividing the waves 2 and 3 data by 12, it is possible to get an estimate of the ratio of shelter costs to income. Although imperfect, it is difficult to generate any other affordability figure for renters and owners in LSIC.^{Footnote 10}

Table 2-3: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars

In Table 2-3, what could be interpreted as a difference in affordability between owners and renters in Table 2-2 shrinks considerably when read alongside income differences. Renters tend to earn much less than owners, so the affordability differences are not as great as they initially appeared to be in Table 2-2. One exception to this is in wave 1, where renters and owners both spend over half of their income on shelter. Readers should interpret this with caution, however, since it is possible that many respondents relied on other sources (such as savings) rather than income to pay their housing costs. Already by wave 2, however, the ratio of income to shelter costs shrinks considerably for both groups, but especially among renters, suggesting that affordability constraints is a short-term issue for many newcomers (though certainly not all).

As mentioned above, one major reason for such high shelter costs at wave 1 is likely that many immigrants may not work immediately upon arrival to Canada, and that as a result they must either use their savings or incur some debt until they can secure a new source of income. They may also be relatively unfamiliar with the local housing market and over time gain information that allows them to reduce their housing costs (especially for renters). It would be important to identify more about what occurs in the early months, but unfortunately LSIC contains incomplete information for such an analysis. For example, although questions were asked about entry wealth in wave 1, respondents were not asked how much of this money remained after two and four years in Canada (only savings in other countries were asked about). Additionally, respondents were asked if they used savings to help them through bouts of unemployment, but they were not asked how much of their savings were used. Consequently, it is possible to respond positively when asked about using savings even though minimal savings were actually used.

It is also important to note that the values presented in Table 2-3 above and later in this report differ from the more commonly-used Average Shelter-Cost-to-Income Ratio (STIR). STIR refers to the proportion of total before-tax household income spent on shelter. The Shelter-cost-To-Income Ratio is calculated for each household individually by dividing its total annual shelter cost by its total annual income. The average STIR is then computed by taking the average of the individual households’ shelter to income ratios. STIR is not calculated by dividing the average shelter cost by the average income of the economic family (which may or may not include everyone in a household)^{Footnote 11}, as is done here. Since the LSIC mostly contains information on income of the economic family (it does not have income information for every household member), the STIR could not be used here and a proxy was created (based on the economic family and not the individual), even though the numbers should be very close to one another.

2.3 Comparisons with Canadians overall

A considerable body of research in Canada (Haan 2007; Rea et al. 2008; Skaburskis 1996; Ley 2007) compares the housing success levels of immigrants relative to the overall Canadian population. The broad consensus of this research is that by and large immigrants flourished in Canada’s housing market at one time. They moved quickly into homeownership, bought into appreciating housing markets, and, in the process, accumulated considerable housing wealth. More recently, however, the research shows that residential outcomes have been more mixed (even though Table 2-1 shows considerable progress for LSIC respondents). Although some groups, most notably the Chinese, continue to do well in Canada’s housing market, many others do not, producing a more pronounced bifurcation of housing ‘haves’ and ‘have-nots’ (Myles and Hou 2004).

As a useful backdrop for the current study, the use of Census data and inter-cohort comparisons permits a broad and useful comparison of trends over time (particularly between immigrants and the Canadian-born). However, a lack of detailed information on wealth and household arrangements does not enable an analysis of the many determinants of residential success as is possible with the LSIC. The LSIC, therefore, permits research on topics of immigration and housing that have never been studied in Canada (such as the effect of entry wealth on residential outcomes). One disadvantage of using LSIC is that it does not permit a direct comparison with either the Canadian-born or Canadians overall.

That said, it is important to compare the results from LSIC respondents to the Canadian population to the fullest extent possible because of the wide differences that exist in shelter costs across Census Metropolitan Areas (CMAs). In this section, the LSIC sample is first compared to Canadians overall, regardless of whether they own or rent, then the LSIC sample is divided into owners and renters by CMA. Ideally, the LSIC sample could be compared to Canadians by housing tenure type at each time point, but data limitations prevent this comparison (we must rely on the census, which only has data for 2001 and 2006). Instead, overall comparisons will first be made by CMA, followed by a dwelling type by CMA for LSIC respondents only.

For Canadians overall (which includes immigrants and the Canadian-born), Census data show that just over 16% of household pre-tax income was spent on housing in both 2001 and 2006 (Statistics Canada 2008). Although only observed at two time points, given how similar these figures are at both points in time, and how they more or less capture the beginning and end of the LSIC observation period, this figure will be used here as a rough benchmark for comparison with LSIC respondents. In Table 2-3 above, we see that immigrants spend far more on housing than the national average (although, as we’ll see in Table 2-4, it is partly because they cluster in more expensive urban markets). LSIC renters come closest to all residents over the observation period, with 26% of their income going to housing in the four years after they arrive in Canada. For owners, 32% of family income is spent on housing in wave 3, which represents a decline from earlier time points but still suggests that the average immigrant family spends a significant amount of their income when they choose to buy. In fact, everyone but renter at wave 3 exceeds the “affordability benchmark”, defined by Statistics Canada and the Canada Mortgage and Housing Corporation as 30 percent of pre-tax income. Households that exceed this amount are believed to face affordability issues.

Although the 16 percent figure for Canada overall includes those that own their homes without a mortgage, data from the 2001 and 2006 censuses still suggest that immigrants shoulder much heavier housing burdens than do Canadians overall. Although the 2001 and 2006 comparison points do not align perfectly with LSIC data measurement points, the 2001 census figure for shelter lists renters at an annual cost of $7,932 and owners with a mortgage at $10,022, including owners without mortgage (all figures in $2002), both lower than the comparable figures of $9,168 and $18,516 reported by LSIC renters and owners at six months (calculated by multiplying the monthly costs for owners and renters by 12). By 2006, more than a year after the collection of LSIC wave 3 data, the census reports housing costs among the general population of $7,922 for renters and $10,742 for owners, compared to $8,892 and $17,928 for LSIC respondents at wave 3.^{Footnote 12} These numbers provide further evidence that immigrants face housing affordability issues upon arrival to Canada.

As mentioned earlier, one partial explanation for the much higher than average shelter costs among LSIC respondents is the fact that many of them live in Canada’s most expensive housing markets. This is no doubt true, but it is instructive to note that income for immigrants in LSIC are also well below the Canadian average, so it is unlikely that income differentials absorb these high shelter costs by location. Consider that in 2000 average income for Canadian households was $63,613 (or $5,301 per month) and $67,351.55 (or $5,613 per month) in 2005, considerably higher than the values shown for LSIC renters and owners in Table 2-3. In the section below, the national differences above are further broken down into regional variations.

2.4 Do housing costs vary by location?

The period in which the LSIC immigrants are followed, 2001-2005, was marked by dramatic change in many of Canada’s metropolitan housing markets. As Figure 1-3 shown in part one of this report illustrates, average prices in Toronto increased by at least $50,000 in just four years. In Vancouver, the Real Estate Board of Greater Vancouver reports that the 2001-2005 increase was closer to $200,000.^{Footnote 13} Edmonton and Calgary also experienced dramatic increases, whereas several cities in Eastern Canada saw more modest levels of price appreciation.

These changes appear to have impacted affordability for many. According to a report by Statistics Canada, 31.7% of Toronto residents and 30.4% of Vancouverites spend at least 30% of their income on shelter costs (Luffman 2006). This figure is for owners and renters combined, but does show that although more immigrants face an affordability crunch, they are not alone in their concerns in these expensive cities.

Despite this, only about 10% of LSIC respondents in wave 1 stated that affordability was their most serious difficulty in finding housing. By wave 3, this number had declined to less than 5%, suggesting that many newcomers do not believe that they are spending an inordinate amount on housing. As a result, immigrants, like the Canadian-born, face different housing options based on where they live. Furthermore, given how quickly price appreciation occurred in these regions, newcomers who came before a price increase would likely have found both rental and owned housing to be more affordable than those that arrived after the increase.

Table 2-4: Median shelter costs ($2002) by Census metropolitan area (CMA), LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars. Number of observations measured at wave 1.
Note: Figures in brackets refer to the CMA median for all primary maintainers, and are taken from the 2001 and 2006 censuses.

Table 2-4 shows that LSIC respondents in some cities experienced much higher increases in shelter costs over time relative to others. Montreal and Winnipeg had the lowest shelter costs for the observation period for LSIC respondents at all time points, and it is Toronto and Calgary with the highest shelter costs across the observation period.

Comparing LSIC respondents to other residents in each CMA (the numbers in brackets), we see several instances of newcomers paying more for shelter than anyone else at wave 1 (CMA medians for the entire population are listed in brackets each time). This is particularly true in “Other CMAs” and rural areas. By wave 3, all LSIC respondents are outspending their other CMA counterparts, with immigrants in rural areas continuing to spend more than double the amount on housing that other rural dwellers spend.

Looking at change within CMAs, although LSIC respondents saw increases in shelter costs in all regions, the increase was especially striking in Calgary and Edmonton, at roughly $360 (42%) and $330 (47%), respectively. On the low end, LSIC respondents in Vancouver ‘only’ saw a $114 (13.9%), and Winnipeg a $88 (16.3%), increase in shelter costs between 2001 and 2005. For all residents in a CMA, the increases are much smaller in terms of percent increase, and vary from $16 (2%) in Vancouver to $88 (13%) in Edmonton.

The connection between growing rates of ownership and shelter costs, although certainly not perfect, is evident in most cities. For example, Calgary and Edmonton, the CMAs with the largest increase in shelter costs, see 45 and 36 percentage point increases in homeownership between 2001 and 2006. At the same time, Vancouver also sees a sizeable and similar increases in ownership (~30 points), but it has the lowest rate of increase in shelter costs between waves 1 and 3, at 13.9 percent.

Table 2-5: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/O denotes the ratio of rental to ownership costs. All values are in 2002 dollars.

Table 2-5 shows that in most cases, renting typically costs roughly half of what owning does. Note that the stark differences in the price of owning a home are also evident in the rental market, where immigrants paid as much as $920 per month at six months to rent in Toronto and as little as $514 to rent in Montreal. Over the observation period, Toronto remains the most expensive CMA for rent, and Montreal is surpassed by Winnipeg for inexpensive rent. Although rent usually costs about half of what owning does for LSIC respondents, the price trends do not always follow one another. Over time, the cost of owning increased in four CMAs but only two CMAs saw an increase in rent (Montreal and Edmonton), and in two places (Ottawa/Hull and Winnipeg), the cost of owning went up alongside a drop in the price of rent.

As with Canadian trends overall, one potential explanation for the changes between cities over time is that some regions provided greater employment opportunities for newcomers, which then translated into an increase in housing expenditures. In Alberta, for example, unemployment rates for recent immigrants in recent history have been nearly half of what they were in other parts of Canada (Alberta Employment and Immigration 2008), suggesting that a greater proportion of newcomers to Alberta may be able to choose to own versus rent compared to those that settled in other parts of Canada. This, of course, assumes that immigrants are making enough money to afford adequate housing, which once again points to the utility of comparing housing costs to income (Tables 2-6 and 2-7).

Table 2-6: Median shelter costs ($2002) for renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/I denotes the ratio of rental costs to income. All values are in 2002 dollars.

Turning first to renters (Table 2-6), there is a clear trend of rising incomes operating alongside relatively stable rental costs in nearly every city, thereby increasing affordability. The dropping rent-income ratio suggests that many immigrants are choosing to rent even when their income increasingly provides them with the option to buy.

That said, newcomers do appear to earmark a significant portion of their income for housing in their early years in Canada, particularly shortly after arrival. Although this is true in all CMAs, it is particularly the case in Toronto, where respondents report spending over 70% of their median income to afford their dwelling in wave 1. However, this is short lived, and by wave 2 Toronto respondents are spending 34% of their income on housing, slightly less than their Ottawa/Hull counterparts. There is substantial improvement in all metropolitan areas, with immigrants spending an average 26% of their median income on rent. By the third wave, all but one are below 30%, and the one that remains above (Ottawa/Hull) is only slightly above the threshold.

In some ways, the ratio of rental costs to income could be considered misleading, since the income data does not include savings, which might be a major component of how respondents and their families afford housing in their early years. Furthermore, the income data in LSIC includes respondents that did not report earning any income. This is particularly the case for Toronto, where nearly 400 respondents reported no income whatsoever. The decision to include them in the calculations above stems from the fact that housing is a necessity regardless of income or employment, and that it is informative to include these respondents in all calculations.

Table 2-7: Median shelter costs ($2002) for owners, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: O/I denotes the cost of owning relative to income. All values are in 2002 dollars.

Turning now to owners (Table 2-7), a declining proportion of income dedicated to housing costs is also evident for this group over time. In wave 1, owners spend over half of their income on shelter, but as with renters this amount declines dramatically, so that by waves 2 and 3 the proportion shrinks to roughly 1/3. These rapid declines are evident in all CMAs, but are especially pronounced in the ‘big three’ CMAs of Montreal, Toronto, and Vancouver, plus Calgary, largely because of the high costs for households six months after arrival.

Toronto and Vancouver’s housing markets appear to be especially gruelling for newcomers, as they have some of the highest priced housing, and some of the lowest income levels. Yet, a large majority of immigrants choose to live in these two regions even though it means that, on average, they can expect to have pronounced affordability issues if they choose to own. So great is the proportion of immigrants in these two regions that the total owner/income ratio indicates an affordability crunch for all wave 3 respondents, even though it is only Toronto and Vancouver where respondents report spending more than 30% of their income on their owned dwelling.

2.5 Variations across visible minority groups

Up to this point, we have largely looked at immigrants as a homogenous group, distinguished only by their housing tenure status or the housing market they live in. In the remainder of this section we will move beyond this assumption of immigrant homogeneity and begin to focus on differences across subgroups. First, we explore differences across visible minority groups, followed by variations across admission categories, region of origin, education and age.

Table 2-8: Median shelter costs ($2002) by visible minority status, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars. Number of observations measured at wave 1.

In Table 2-8, median shelter costs are shown by visible minority status, revealing wide variations across groups.^{Footnote 14} Arabs and Blacks spend the least money on housing in all three waves, whereas high spenders change across waves. In wave 1, it is Koreans, South Asians, and West Asians that spend the most, whereas by wave 3 all groups but Arabs and Blacks are spending as much as the wave 1 big spenders.

These differences across waves show that different residential trajectories across groups already exist in the first four years after arrival. Some groups, like Arabs and Blacks, maintain low shelter costs across the four-year period, whereas most other groups increase their expenses considerably over this short time frame. Koreans, while having the highest expenses initially, only increase their expenses by about $150, yet they almost have a fourfold increase in ownership rates. For most other groups, shelter costs rise alongside increases in ownership. This is true even for Arabs and Blacks, although wave 3 homeownership rates remain below those of all other groups.

There is wide variation in what each group pays for housing at all points in time, and one of the major explanations for this disparity could be location^{Footnote 15}, and this prospect will be investigated more closely in the regression results presented later.

The most obvious explanation for the variation is that some groups move in to homeownership faster than others, and that they encounter the higher housing costs that accompany the transition. Table 2-8 supports this assertion, with Blacks and Arabs posting the lowest homeownership rates of any group at all time points (excepting West Asians in waves 1 and 2). Similarly, most of the groups that spend a lot on shelter also have the highest levels of ownership across the board (Koreans in wave 1 are a noteworthy exception to this). Further evidence of different residential trajectories can be seen by looking at the rates of increase over time. Some groups, like South Asians and Filipinos, experience more than 30 percentage point increases in rates of ownership between 2000/2001 and 2004/5. Not surprisingly, it is many of the groups with the greatest increase in ownership rates that see the greatest increases in shelter costs.

Table 2-9: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/O denotes the ratio of rental to ownership costs. All values are in 2002 dollars.

Table 2-9 shows that, in most instances, the amount spent on housing (both rented and owned) increases over time, and the ratio of renting to owning converges between groups. At six months, Whites and Latin Americans spend nearly twice as much to own as they do to rent, whereas for Blacks is it is three times as much. For Koreans, there is no difference between the cost of renting and owning at wave 1. After four years in Canada, Koreans continue to spend far more on rent than any other group, at 79% of the cost of owning, whereas all other groups approach the overall trend of renting costs being about half the cost of owning.

The ratio of rental to ownership costs can be considered a proxy for gauging how important homeownership is to a particular group. If, for example, a group spends a much greater proportion of their income to own versus rent, we could conclude that ownership is relatively important within that group, and that households make sacrifices to actualize their goal to own. If, on the other hand, the proportions are roughly equal, we could conclude that the dwelling types are more interchangeable, and that a group is more indifferent about dwelling type than one where costs for ownership are particularly skewed.

Table 2-10:  Median shelter costs ($2002) for renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/I denotes the ratio of rental costs to income. All values are in 2002 dollars.

Although all groups above face affordability constraints at six months (as assessed with the 30% affordability benchmark criteria), the differences in Table 2-10 are striking. The “other visible minority” group reports spending 55%, Chinese report 81%, and South Asians report spending 48% of their income on rent at wave 1. Koreans spend an 355% of their very low average monthly income. These high spending levels make it difficult to understand how some groups are able to sustain such high expenses (nearly all Koreans enter under skilled worker and other economic classes, which suggests that they have significant entry wealth), and may provide some explanation as to why some groups are likely to form multiple-family dwellings or crowd into cramped quarters. Koreans begin to resemble other groups after two years, largely because they see little change in shelter costs alongside increases in income.

Looking at costs to own (Table 2-11), nearly all groups are spending a huge proportion of their income on housing. Once again, Koreans lead the pack, with 375% of their income going to owned shelter costs. Arabs spend 100% on owned shelter costs. They are not alone here, however, with all groups but Latin Americans, Whites, and Other Visible minorities spending at least half of their income on shelter at six months. Readers are reminded that these figures are to be treated with caution, since LSIC did not have a direct measure of monthly income, necessitating a crude calculation using income earned while in Canada and the number of months a respondent was in Canada. By wave 3, significant across-the-board improvements can be seen, although only Filipinos and Whites are still not facing an affordability constraint, as defined by the 30% cut-off used by CMHC. For most groups, this occurred because costs to own declined slightly while incomes rose substantially. Although it is difficult to know for certain why ownership costs declined, it may be due to a drop in interest rates, an increased knowledge of the housing market, relocation to cheaper housing markets, or to a less expensive location within the same census metropolitan area.

Table 2-11: Median shelter costs ($2002) for owners, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: O/I denotes the cost of owning relative to income. All values are in 2002 dollars.

When comparing Tables 2-10 to 2-11, we see that 4 of the 10 groups in wave 1 report spending a smaller proportion of their income on owner-occupied housing than they do on rented dwellings. Part of the reason for this may be that home owners have more secure employment than renters or employ other strategies such as shared dwellings, and have much higher incomes and are therefore more able to choose accommodations that match their incomes more closely than those that rent. For a group like Arabs, ownership costs exceed rental costs by a fairly wide margin at wave 1.

2.6 Variations by source region^{Footnote 16}

Because visible minority categories were designed to capture differences in employment equity, an outcome that stems from differential treatment by the broader society, there are some groups within the scheme that contain considerable heterogeneity. For instance, Blacks in Canada hail from over 60 countries, suggesting that the demand for housing may not be consistent across the many groups that identify as Black. That is not to say that differences across visible minority categories are not important, since it provides a window for looking at differences across potentially racialized categories, but that looking at visible minority status answers some questions and ignores others.

In this section we shift from employment equity designations to one of source region, under the assumption that access to, and desire for, certain housing types might differ by source region. There might be, for example, a strong desire for homeownership within some regions, such as there was for Italian immigrants in postwar Toronto (Iacovetta 1992), or, more recently, the Chinese in several major Canadian cities (Li 1998). For others, renting may be more popular.

Turning first to shelter costs (Table 2-12), there is a relatively small gap of about $170 among all groups at six months, and the rate of growth over time is fairly consistent for most groups (around 20%), except for All Other Areas, which is higher than the others at 29%. African and the Middle East, with a growth rate of 9% over the period is less than half of most other groups.

Table 2-12: Median shelter costs ($2002) by source region, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars. Number of observations measured at wave 1.

In Table 2-13, we see once again that most households spend nearly twice as much to own as they do to rent, although there are differences.

Table 2-13: Median shelter costs ($2002) for owners and renters by source region, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/O denotes the ratio of rental to ownership costs. All values are in 2002 dollars.

Newcomers from Europe and the United Kingdom report spending more than three-fifths as much to rent as they do to own at six months, whereas for those from Africa and the Middle East it is only two-fifths (although there are far fewer owners here). These gaps in shelter costs are much less pronounced when they are compared to income and broken down by dwelling type (Tables 2-14 and 2-15).

Table 2-14: Median shelter costs ($2002) for renters by source region, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/I denotes the ratio of rental costs to income. All values are in 2002 dollars.

Renters are able to bring their shelter cost ratios down after four years, with no groups spending more than 30% of their income on housing within four years of arrival. In wave 1, Asians spend 59% of their income on rent, but reduce this amount to 27% four years later due mainly to increases in their incomes. Interestingly, after four years in Canada, Europeans spend the most in absolute terms, but the least relative to income. This compares to those from Africa and the Middle East, who report spending the least in absolute terms, but the most in relative terms.

Table 2-15: Median shelter costs ($2002) for owners by source region, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: O/I denotes the cost of owning relative to income. All values are in 2002 dollars.

For owners (Table 2-15), affordability constraints are also quite pronounced. At six months, all groups spend more than 30% of their income on shelter. By wave 3, costs have fallen for all except Europeans while for the same period incomes increase. Thus, only Africans/Middle Easterners and Asians still face affordability issues (as judged by the 30% cut-off criteria) in wave 3. However, their numbers are so substantial that the average for all LSIC respondents in wave 3 is pushed above the cut-off.

As with all classifications of immigrants, however, it is difficult to determine the extent to which the trends above stem from affordability choices versus constraints or initial entry wealth. It is possible that some groups choose to allocate more resources to housing than others, because they see owning a home as a worthwhile investment, an essential durable good, or a critical component of building a good life in Canada.

2.7 Variations by admission category^{Footnote 17}

The next subgroup analysis to be presented is by category of admission. Every year Citizenship and Immigration Canada (CIC) endeavours to admit immigrants to collectively fulfill its mandate of meeting Canada’s labour market needs, humanitarian obligations, family reunification strategies, etc. CIC classifies immigrants by admission category, and respondents from some of the categories can be found in LSIC.

In the tables below, housing costs are presented for five different admission categories: family class, refugees, skilled worker (principal applicant), skilled worker (spouse and dependents), and other economic class. Family class refers to the process whereby a Canadian citizen or a permanent resident of Canada sponsors his or her spouse, common-law partner, conjugal partner, dependent child (including adopted child) or other eligible relative (such as a parent or grandparent) to become a permanent resident. Refugees are people in or outside Canada who fear returning to their home country. In keeping with its humanitarian tradition and international obligations, Canada provides protection to thousands of people every year. Refugees often have government subsidized housing for their first year in Canada. Skilled workers are selected as permanent residents based on their education, work experience, knowledge of English and/or French, and other criteria that have been shown to help them become economically established in Canada. Provincial Nominees and Business Immigration Programs form the bulk of the Other Economic Class category.

In the tables below, “Family Class” includes all respondents in the family class response categories, “refugees” includes all categories of refugee (government sponsored, privately sponsored and other refugees abroad), and “other economic class” includes provincial nominees and their spouses and dependents. “Skilled workers — principal applicants” are those who came to Canada as principal applicant skilled workers, with or without relatives in Canada. Finally, “skilled workers — spouses and dependents” contains those who arrived as a spouse or dependent of a principal applicant skilled worker.

Table 2-16: Median shelter costs ($2002) by admission category, LSIC waves 1-3

Source Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars. Number of observations measured at wave 1.

Given CIC’s admission criteria across categories, there should be some differences in housing outcomes across groups, illustrated in Table 2-16. Those that came to Canada under either the Family Class or Other Economic Class initially spend more on housing than other groups, although all groups increase their expenditures over time. Refugees spend less on housing overall, the reasons for which cannot be gleaned from LSIC data or the codebook. It may be because the refugee housing is subsidized, and that refugees are only reporting their portion of the costs.

Table 2-17: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/O denotes the ratio of rental to ownership costs. All values are in 2002 dollars.

Table 2-17 elaborates on Table 2-16 by dividing each group by housing tenure status (owned versus rented). As with housing costs overall, Family class, Refugees and Skilled worker Principal Applicants spend less to rent relative to owning than the two other groups at six months. Those from the Other Economic Class spend 81% to rent what they do to own. Although this proportion declines over time, it remains well above that of all other admission categories.

Table 2-18: Median shelter costs ($2002) for renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/I denotes the ratio of rental costs to income. All values are in 2002 dollars.

The growth in ownership shown in Table 2-16, read alongside the relatively low cost of rent throughout the period in Table 2-17 suggests that immigrants of all admission categories place homeownership fairly high on their priority list. This point is further illustrated by looking at the proportion of income spent on owning versus renting (Tables 2-18 and 2-19).

Turning to renters first (Table 2-18), all wave 1 respondents exceed the affordability threshold by spending at least 30% of their income on rental housing. The most extreme example of this comes from members of Other Economic Class, who, like Koreans earlier, spend far more money on rent they earn in income (as with all values for wave 1, this number should be interpreted with caution, since business class entrants have savings and may also be engaged in starting their businesses at this point). Considerable declines in the relative cost of renting are evident across the observation period, so that by wave 3 most groups are below the affordability threshold. The two exceptions to this are Other Economic Class and Refugees, who nevertheless have still seen housing become more affordable.

Table 2-19: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: O/I denotes the cost of owning relative to income. All values are in 2002 dollars.

Similar patterns are evident for owned accommodations. All classes experience affordability constraints at wave 1 but the situation improves for all groups. That said, Skilled Worker principal applicants are the only group below the affordability threshold by wave 3.

2.8 Education differences in housing experiences

The relationship between education and housing is quite weak for both immigrants and the native-born in Canada (Haan 2005). Nevertheless, Canada admits many immigrants with high levels of educational attainment. In this section, we take a closer look at differences that may exist across education groups.

Table 2-20: Median shelter costs ($2002) by educational attainment, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars. Number of observations measured at wave 1.

Turning first to shelter costs overall (Table 2-20), there is once again evidence of increasing costs over time for all groups alongside increases in ownership. Costs escalate fastest for those with a Bachelor’s degree or higher, although there is also a gentle climb for all education categories. Notice that by wave 3 the gap in ownership rates between all groups is less than 3 percentage points.

Table 2-21: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/O denotes the ratio of rental to ownership costs. All values are in 2002 dollars.

Breaking these costs down by tenure status (Table 2-21), an interesting story emerges. First, consumer price index-adjusted shelter costs have been fairly stable between 2001 and 2005, with declining rental costs and fairly stable costs of ownership. This suggests that the increasing costs of shelter in Table 2-20 over time stems from a trend towards ownership instead of increases within categories. In other words, if the same proportion of immigrants owned in 2001 as in 2005, overall shelter costs in Table 2-20 would still been fairly stable, or they may even have dropped slightly due to a decrease in the cost of renting. A second oddity is that it is those with the lowest levels of education in Table 2-20 spent the most on housing at six months and 2 years. We see from Table 2-21 that this is true for renters and owners at six months, and for owners alone at two years and four years.

Table 2-22: Median shelter costs ($2002) for renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/I denotes the ratio of rental costs to income. All values are in 2002 dollars.

Comparing rental costs with income (Table 2-22), the characteristic pattern of declining relative costs emerge. Households begin by spending roughly 60% of their income on shelter, but this amount declines for all groups because of increases in income, so that no one group spends more than 30% of its income on housing after four years. Relative costs for those with a BA or higher were more than cut in half, entirely due to rising income.

Table 2-23: Median shelter costs ($2002) for owners, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: O/I denotes the cost of owning relative to income. All values are in 2002 dollars.

The same basic pattern exists for owners (Table 2-23), except that affordability constraints (defined as spending more than 30% of income on housing) are more widespread. Within four years of arrival, only those with a Bachelor’s degree or higher are spending less than 30% of their income on their dwelling. Respondents at all other education levels are above the affordability threshold.

2.9 Age differences in housing experiences

Mulder and Wagner (1998) use the notion of the housing career to explain the type of housing individuals and families choose to live in over their life course. The basic profile consists of people living with their parents until they move out into their own rented dwellings (this often occurs when an individual is in his/her 20s). If they choose to marry and start a family, they buy their own starter home, move on to bigger homes, often in the suburbs, as their children grow. Then, once they become ‘empty nesters’, households will move into smaller, though still owned, accommodations. It is not until individuals enter their latter years that they will liquidate their housing equity entirely and opt for rental accommodations, either in the private market or in state-run institutions.

Naturally, the housing career framework does not typify all Canadians, but it does provide a basic framework for understanding the spending patterns of the ‘average family’, including many LSIC respondents. Young people should be more likely to rent, and they should have lower expenses than older people. Given that there are not enough observations to witness the latter phases of the housing career (the downsizing and liquidating housing equity phase), there should be a steady ascension of housing costs across age groups.

In addition to this, we should see a transition from renter to owner over time, since owned accommodations are the most popular type of dwelling in Canada, and that integration should be accompanied with a growth in home ownership. This too will increase shelter costs, as will the aging of individuals over the study period.

Table 2-24: Median shelter costs ($2002) by age group, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: All dollar values are stated in 2002 dollars. Number of observations measured at wave 1.

Table 2-24 more or less reflects both of these expected trends. Although those that were 15-24 years old at wave 1 spend more on housing than their two elder groups, they also have higher ownership rates, and there is otherwise a gradual increase in shelter costs across age groups. Once respondents reach age 25-34, the expectedly modest amount (under the housing career framework) spent on accommodations is evident, followed by a steady growth across age groups. Housing costs also increase within age groups over the period reflecting the growth in ownership over time.

Since immigrants in LSIC came to Canada at about the same time, however, it is likely that any accumulated housing equity would have occurred in another country.

Another benefit that older people reap from owning is a shield against changes in the housing market. There is more volatility in rental prices for each age group than there is in the price of owning. This point to the fact that owning is much more stable than renting (Hurst, Ming, and Stafford 1998), another reason why people choose to buy versus rent.

Table 2-25: Median shelter costs ($2002) for owners and renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/O denotes the ratio of rental to ownership costs. All values are in 2002 dollars.

Relative to income, those that were 45-54 at each point in time spent the most to rent but, like everyone else, this amount drops quickly, and only 45-54 year olds exceed the affordability threshold after four years.

Table 2-26: Median shelter costs ($2002) for renters, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: R/I denotes the ratio of rental costs to income. All values are in 2002 dollars.

Comparing rental costs with income (Table 2-26), once again the characteristic pattern of declining relative costs emerges as time is spent in Canada. The drop is particularly sharp between six months and two years, but does continue for all age groups in the last two years of observation. Households begin by initially spending between 40% (the oldest cohort) and 66% (35-44 year olds) of their income on shelter, but after four years this amount declines for all groups, largely because of increases in income. Two groups 25-34 year olds and 35-44 year olds, experience a more than doubling of their income in their first four years.

Table 2-27: Median shelter costs ($2002) for owners, LSIC waves 1-3

Source: Longitudinal Survey of Immigrants to Canada
Note: O/I denotes the cost of owning relative to income. All values are in 2002 dollars.

The same pattern of declining ratios of shelter costs to income can be seen in Table 2-27 for those in owned accommodations. All age groups earmark considerable resources to owner-occupied housing in the first four years, so much so that nearly all age groups at all points in time spend more than 30% of their income on housing. The only exception is 25-34 year olds at four years, who spend 29% of their income to own at four years.

2.10 Conclusion

In this section of the report, we looked at affordability levels among LSIC respondents, categorized by various criteria. This was followed by differences across Census Metropolitan Areas, which showed how the expensive housing markets of Toronto and Vancouver appear to affect all residents, including LSIC respondents. As Canada’s two most expensive cities, immigrants who choose to settle in either region experience much more severe housing affordability issues than do their counterparts in other parts of the country. This suggests that immigrants might do well to consider settling in other parts of Canada, where housing is more proportionate to income.

Although many groups do quite well in the Canadian housing market, several appear to be much less able to ‘keep up’ to others in their arrival cohort in terms of residential mobility. Arabs and Blacks stand out here, as they continue to spend the least amount of money on housing and have the lowest levels of home ownership. This may not necessarily reflect a situation of adversity (they may have different preferences in relation to ownership than other groups do), but it does raise a warning flag about the residential success of these group members relative to others. When the analysis was broken down by region of origin instead of visible minority status, it was people from Africa and the Middle East that faced the greatest challenges in the housing market.

Following this, admission category differences were discussed. Here, refugees stood out as the groups experiencing the lowest levels of residential success. This is consistent with the previous research (Chan, Hiebert, D’Addario, and Sherrell 2005; Danso 2001; Murdie, Chambon, Hulchanski, and Teixeira 1996) that documents the difficulties that refugees face in the Canadian housing market, although it is difficult to know whether this in fact reflects hardship in every instance. Some examples of where it might not would include individuals that left their previous country by force and plan to return once the reasons for leaving subside. Newcomers from other admission categories fared considerably better.

This section of the report closes by looking at differences by age and education categories. Differences in education group were fairly minor, at least when compared to most other divisions that were made in this section. Those with a bachelor’s degree or higher did appear to have a slight advantage, possibly pointing to the recognition they are more likely to receive in the labour market. Regarding age, older immigrants appear to both make more and spend more, suggesting that they are receiving at least some recognition for their previous experience, which allows them to afford better housing. They also likely have higher levels of entry wealth.

What these tables show repeatedly is that LSIC respondents are doing quite well in the Canadian housing market. As mentioned earlier, they moved in to owner-occupied housing at a faster rate than their predecessors (Haan 2007), suggesting that, on average, immigrants are doing quite well in terms of homeownership attainment. That is not to say that there aren’t hardships, but the broad storyline for this cohort is a positive one.

In the next section, we move beyond the descriptive analysis presented here to focus on the factors that predict one aspect of residential success: homeownership.

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