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Study: Impact of home equity on incomes of retirement-age households
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The equity that homeowners have built up through a lifetime of investment in their homes makes an important contribution to household finances as they enter retirement.
By retirement age, 75% of households are homeowners, and of those, 74% own their homes without a mortgage.
The economic benefit of owning a home is equivalent to the rent that does not have to be paid.
In 2006, when the value of this benefit was taken into account for households headed by individuals in the age group 60 to 69, it increased incomes by $5,500 or 10%.
For households headed by those in the age group 70 and over, incomes rose by $5,400 or 12%.
For households in the age group 70 and over whose household income was ranked in the bottom 20%, home ownership raised incomes, on average, by about $4,200 or 20%. For households in the same age group whose income ranked in the top 20%, income increased by $10,400, but, in proportional terms, by a more modest 7%.
Note to readers
Recently, concerns have been raised as to whether Canadians are prepared for retirement.
Using data from the 2006 Survey of Household Spending and the 2006 Census of Population, this study estimates the contribution to household finances generated by the home equity of working-age and retirement-age households.
Net income is defined as gross income less income taxes and payments made for Employment Insurance, life insurance, annuities, and public and private pension plans. The benefit of home ownership is defined as the value of housing services provided by home equity. The value of housing services is based on estimates of the financing costs of owning a home and the rents paid for housing.
Across all households that own their own home, the average benefit from owner-occupied housing is lowest in Newfoundland and Labrador ($2,000) and highest in British Columbia ($7,300). Across metropolitan areas, this benefit is lowest in Saguenay, Quebec ($1,900), and highest in Vancouver, British Columbia ($8,900).
The research paper "Incomes of Retirement-age and Working-age Canadians: Accounting for Home Ownership," is now available as part of the Economic Analysis (EA) Research Paper Series (11F0027M2010064, free) from the Key resource module of our website under Publications.
Similar studies from the Economic Analysis Division are available on our website (www.statcan.gc.ca/economicanalysis).
For more information, or to enquire about the concepts, methods or data quality of this release, contact Mark Brown (613-951-7292), Economic Analysis Division.
