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June 2002     Vol. 3, no. 6

Housing: An income issue

Sophie Lefebvre

Housing is important to quality of life—in addition to enough food and clothing, people expect to have a decent dwelling. But some households face affordability problems and may be forced to choose between appropriate housing and other necessities. Living in inappropriate housing can have permanent consequences, especially on children. A study by the Canadian Council on Social Development found that housing that is crowded or in disrepair has negative effects on children's health, behaviour and development (Jackson and Roberts 2001).

The housing market has changed during the last two decades. Some of the transformations affected the supply side of the rental market. Investments in social housing diminished dramatically between 1985 and 1997 (Cooper 2001) and, at the same time, construction of private rental dwellings fell. These factors, among others, led to fewer available rental units. According to the Canada Mortgage and Housing Corporation (CMHC), the average rental vacancy rate in metropolitan centres fell from 4.3% in 1996, to 1.6% in 2000, to 1.1% in 2001.

This article examines how Canadians were housed in 2000. What percentage lived in owner-occupied homes? Were their homes in good condition? Was the size suitable for their needs? And, what proportion of their income was spent on housing? (see Data source and definitions).

Ownership is tied to location and income

Homeownership is a long-term investment that can help maintain one's standard of living over the life cycle (see Life cycle and housing). Owners of mortgage-free homes can generate additional funds in retirement by trading down to a less expensive home or negotiating a reverse mortgage, which provides regular annuity payments. note 1 

In 2000, 67% of Canadian households owned the dwellings they lived in, while the remainder were tenants, with 4% living in government-subsidized housing note 2  (Chart A). Half of owners had a mortgage, while the other half were mortgage-free.

Ownership varied considerably by region and community size. In urban centres, 64% of households owned their dwelling, compared with 86% in rural areas (population under 10,000) (Table 1). Having a mortgage also varied by area—51% of rural owners were without mortgages compared with 30% of urban dwellers. This may be because the lower real estate value in small towns enables households to pay off their mortgage faster, and because farms tend to be passed down from one generation to the next.

The Atlantic and Prairie regions had the highest ownership rates (above 75%). The Atlantic region and Manitoba-Saskatchewan also had the highest level of mortgage-free owners (43%). By contrast, at 58%, Quebec had the lowest rate of homeownership in the country.

Ownership was related to after-tax household income. Even when adjusted for household size, note 3  income played an important role in determining the level of ownership. For example, only 40% of households in the lowest income quintile owned their homes, compared with 85% in the highest.

Household composition—more precisely, the presence of a second adult in the household—was also tied to ownership. Ownership rates for one-person households and lone parents (43% and 36% respectively) were significantly lower than rates for couples and other households (80% and 71% respectively).

At every income level, single-adult households (lone-parent and one-person) had a significantly lower rate of ownership than ones with more than one adult (couples and other households). For example, the ownership rate of single-adult households was 28% in the lowest income quintile compared with 55% for couples and other households, and 66% compared with 90% in the highest quintile (data not shown).

One in seven homes needed major repairs or was unsuitable in size

In 2000, the vast majority (86%) of households lived in housing that did not need major repairs (in good condition) and had enough bedrooms to meet their needs (suitable in size) (Chart B). The remaining 14% lived below the condition or size norms—8.3% in dwellings needing major repairs, 5.1 % in dwellings unsuitable in size, and 0.5% in dwellings that both needed major repairs and were unsuitable in size.

Renters were more likely than owners to live in dwellings that did not meet the norms, especially in terms of size—11% of renters compared with 3% of owners (Table 2). Some 8% of owners with a mortgage lived in housing that needed major repairs.

Female lone parents and 'other households' had the highest rates of living in dwellings that did not meet the condition norm (10%), as well as the highest proportions living in dwellings unsuitable in size (15% and 14% respectively).

The proportion of couples without children living below the condition or size norms (10%) was only two-thirds that of couples with children (15%). In both groups, the majority of the dwellings were in need of major repairs. But couples with children were four times more likely than couples without children to live in housing unsuitable in size. One in eight (13%) rural households lived in dwellings that needed major repairs, compared with 8% of urban households.

The proportion of households living in dwellings below the condition or size norms was almost three times higher in the lowest income group (21%) than in the highest (8%). (These data cannot separate the households that have the choice or ability to modify their housing conditions from those that do not.)

Condition and size problems often tied to affordability

Overall, households spent roughly one-fifth (21%) of their after-tax income on housing (Table 2). Those living below the housing condition or size norms also tended to have a higher median housing expenditure ratio. For example, renters spent 28% of their income on housing, and yet 19% of them lived in housing in need of major repairs or unsuitable in size. Similar results were found for female lone-parent families and households in the lowest income quintile. For these groups, roughly one in four households lived in below-standard housing, yet they spent approximately one-third of their income on housing note 4 —suggesting that they were not in a financial position to improve their situation. However, not all households with high housing cost ratios lived in housing below norms. For example, women living alone spent 29% of their after-tax income on housing, but only 10% of them lived in dwellings in need of major repairs or unsuitable in size.

The median ratio hides a wide distribution

The distribution of households by their housing expenditure ratio differed greatly by ownership status. A full 82% of mortgage-free owners were in the lower ranges, spending less than 20% of after-tax income on housing (Chart C). For both tenants and owners with mortgages, the distribution of households peaked in the 20.0 to 29.9% range. However, the distribution of tenants was flatter than the distribution of owners with a mortgage. Indeed, just over one in five renters, compared with only one in eight owners with a mortgage, spent 40% or more of after-tax income on housing.

Housing costs significant for lower-income households

Tenants spent a greater proportion of their income on housing costs because the majority of them were in the two lowest income groups. Among tenants and owners with a mortgage in the same income group, owners spent a slightly higher proportion of their income on shelter. note 5  In the lowest income quintile, tenants and owners with a mortgage spent almost 40% of their income on housing (Table 3). By contrast, owners without mortgage spent 21%. The proportion of owners without a mortgage was almost constant across income quintiles—approximately one third of each group (30% to 37%). On the other hand, the proportion of owners with a mortgage increased with income. Only 9% of households in the lowest income quintile were owners with a mortgage compared with 50% of households in the highest quintile.

The housing cost burden of households in the lowest income group was considerably reduced if the dwelling was mortgage-free. Housing costs do not seem manageable for households in the lowest income group unless they own their dwelling outright—but less than one-third did.

Factoring in choice

Some households spend a high proportion of their income on housing because they prefer a larger house or are trying to pay off their mortgage as quickly as possible. On the other hand, some households simply may not have the capacity to reduce their housing expenditures. Their choices are limited by the availability of affordable housing suited to their needs. To better understand households deemed to have fewer housing choices, the final section of this article focuses on low-income households.

In 2000, 11% of households were in a low-income situation (see Data source and definitions). One-person households represented 49% of low-income households but only 22% of non low-income households (Chart D). The other overrepresented group was lone parents (15%). More precisely, lone mothers represented 14% of low-income households and only 3% of non low-income households. In fact, more than one-third of lone mothers were in the low-income group. Also, tenants made up almost three-quarters of low-income households, compared with just over one-quarter of non low-income households.

Low-income households more likely to experience below-standard housing

Assuming that low-income households have fewer housing choices, one might expect to find this group more vulnerable to problems such as condition and size. Indeed, one in four low-income households lived in a dwelling needing major repairs or unsuitable in size, compared with approximately one in eight non-low income households (Chart E). Low-income households were three times more likely than non low-income families to live in housing with an insufficient number of bedrooms. They were also one-and-a-half times more likely to live in a dwelling in need of major repairs.

Low-income renters spent almost half their income on housing

Furthermore, the median housing expenditure ratio of low-income households (39%) was twice as high as that of non low-income households (20%) (Table 4). Low-income tenants, who represented 70% of all low-income households, spent an even larger proportion of income on their dwelling (42%). Tenants living in non-subsidized housing spent 48% of their income on housing; those in government-subsidized housing spent significantly less (31%).

Mortgage-free owners represented 24% of low-income households and spent 28% of their after-tax income on housing, while owners with mortgages represented only 6% of low-income households and spent 44%.


The majority of households (67%) owned the dwelling they lived in, but ownership rates varied by several household characteristics, primarily income. Only 40% of households in the lowest income group were owners, compared with 85% in the highest.

Most households (86%) lived in housing that was in good condition and suitable in size, and spent roughly one-fifth of their after-tax income on shelter costs. The remaining 14% of dwellings had some condition or size problem, which was often tied to inadequate household income. Low-income households spent an average 39% of their income on housing, and yet one in four lived in a dwelling that needed major repairs or was unsuitable in size.

Almost three out of four low-income households were tenants, and those with government subsidies had a significantly smaller housing cost burden. Owning a mortgage-free house had a positive effect on the housing cost ratio of low-income households and older households.

Generally, one-person households and lone-parent families were more likely to experience high housing cost ratios. Lone-parent families and 'other households' were more likely to experience housing condition or size problems stemming from their high proportion in the lowest income group.

Finally, over one in five renters spend 40% or more of after-tax income for housing expenditures—a significant figure since 70% of low-income households were renters.


Data source and definitions

This article used the 2000 Survey of Household Spending (SHS)—an annual survey on household expenditures, income, dwelling characteristics, and household facilities. Personal interviews were conducted with approximately 15,000 households throughout the 10 provinces. Collection took place between January and March 2001, and income and spending figures were obtained for January 1 to December 31, 2000. The SHS has been conducted since 1997 and replaced both the periodic Family Expenditure Survey and the Household Facilities and Equipment Survey.

This study was limited to households in 2000 consisting of one economic family that rented or owned its dwelling throughout the entire year, reported positive housing costs and income, and had a housing expenditure ratio (see below) not exceeding 100%. These households represented 90% of the total SHS estimate.

A household is a person or group of persons occupying one dwelling unit. A full-year household has at least one full-year member.

Household after-tax income is the sum of the after-tax incomes of all members of the household aged 16 and over in 2000. It comprises income from wages and salaries, self-employment, investments, government transfer payments, and pensions. Income information for part-year members was collected for the portion of the year during which they were members of the household.

Adjusted after-tax income is adjusted for household size, composition and part-year members. The goal is to be able to compare all households on a common income basis by allowing for economies of scale. The adjustment is the sum of individual factors:

  • One adult is counted as 1, each additional adult as 0.4.
  • Each child under age 16 is counted as 0.3—except in a family with only one adult, where the first child is counted as 0.4.

Each individual factor is also adjusted by the portion of the year (2000) this member was part of the household to allow the individual factor to be representative of a one-year period.

Households A and B had the same after-tax income, but since one member of B was present for only 26 weeks, the available income for this household was divided by a smaller adjustment so that household B had a higher income than household A. Household C had the highest after-tax income, but given the size and composition of the household, it had the lowest income available.

Adjusted after-tax income quintiles are obtained by ranking households in ascending order of adjusted household after-tax income, and partitioning them into five equal groups.

Household composition:

  • One-person (male or female)
  • Couples (with or without children under 18)
  • Lone parents (male or female) with children under 18
  • Other households

'Other households' consist of relatives living together who do not fall under the definitions above—for example, a brother and sister. Also included in this category are lone parents with all children 18 and over.

Housing expenditures: Yearly spending on principal accommodation. For owners, these included regular mortgage payments, property taxes, utilities (water, fuel and electricity), and condominium charges. For renters, they included utilities (water, fuel and electricity), if not included in the rent.

Housing expenditure ratio: Housing expenditures divided by household after-tax income.

In need of major repairs: Households were asked to assess the condition of their dwelling by responding to a question on need for repairs. To guide the respondent, the question included detailed examples of regular maintenance, and minor and major repairs. The requirement was that a dwelling should need only maintenance, or at most minor repairs to be in good condition. This norm is similar to the adequacy norm defined by Canada Mortgage and Housing (CMHC 1991).

Unsuitable in size: Housing that does not meet the suitability norm defined in CMHC 1991:

  • There can be no more than two persons per bedroom.
  • Parents have a bedroom separate from their children.
  • Household members aged 18 or over have separate bedrooms unless married or cohabiting as spouses.
  • Dependants of the opposite sex aged 5 or more do not share a bedroom.

A low-income household in this analysis has an adjusted after-tax income less than 50% of the median adjusted after-tax income in its area. Twenty different areas were defined. Each of the 10 provinces was divided into urban and rural to allow for the difference between urban and rural housing markets. Note: This is not an official methodology used by Statistics Canada to define low-income households.


Life cycle and housing

Assuming age to be a good indicator of life cycle, the following analysis of ownership, cost ratio, and age group of the household's major income recipient shows changes in housing through the different stages of life.

For households in which the major income recipient was aged 34 less, the majority (56%) rented, and the housing expenditure ratio for both renters and owners was approximately 25%.

Between 35 to 44 years of age, households had the same housing expenditure ratio (25 to 27%), but 65% were owners and most had a mortgage.

Three-quarters of households with a major income recipient between 45 and 54 were owners, and the majority had a mortgage. At this stage, renters spent a higher proportion of their net income on housing than did owners with a mortgage. This difference may be partly because at this stage most households that could afford housing had already become homeowners, and a proportion of renters were lower income recipients. In fact, the median adjusted income of renters at this stage was $20,000 compared with $32,700 for owners.

Between 55 and 64, half of households (52%) were mortgage-free owners, thereby influencing the housing expenditure ratio of owners—only 14% versus 27% for renters.

For the 65 and over group, a smaller proportion of households were owners (70%) compared with the previous stage (80%), but 64% were mortgage-free. Older mortgage-free homeowners spent 15% of their net income on housing expenditures, compared with 34% for older renters.

In summary, ownership rates increased consistently with age until 65 when they fell off slightly. The proportion of mortgage-free owners also increased with age, and for those 55 and over, it represented the housing ownership of the majority of households. Despite ownership, the youngest group had the highest housing expenditure ratio (25%). Retired households (65 and over) living in mortgage-free, owner-occupied dwellings carried a considerably lower housing cost burden than tenants.


  1. A reverse mortgage, through the Canadian Home Income Plan, allows Canadian homeowners 62 and over to convert a portion of the equity of their home into an income stream while living in and owning their home. The amount that can be obtained is between 10% and 40% based on the assessed value of the home and the age of the owners. The older the owners, the larger the percentage that can be converted (see
  2. Households reported themselves if they paid reduced rent that year because of government-subsidized housing from federal, provincial or municipal programs. The estimated 440,000 households (4%) receiving housing assistance under any level of government probably significantly underestimates the real number of households that benefited from reduced rent in 2000. As reported in CMHC's Canadian Housing Statistics (2000), some 639,000 households received housing assistance under existing federal agreements.
  3. Household income was adjusted by an adjustment factor accounting for household size, composition, and part-year members (see Data source and definitions).
  4. In fact, female lone parents living in dwellings below the condition or size norm had a higher median housing expenditure ratio (36%) than those living in dwellings in good condition and suitable in size (31%).
  5. But even within the same income quintile, owners with a mortgage had slightly higher median adjusted after-tax income than tenants, except for the highest quintile (data not shown).


  • Canada Mortgage and Housing Corporation (CMHC). 1991. Core housing need in Canada. Ottawa: CMHC.
  • Cooper, M. 2001. "Housing affordability: A children's issue." Canadian Policy Research Networks (CPRN) discussion paper, no. F/11. Ottawa: CPRN.
  • Jackson, A. and P. Roberts. 2001. "Physical housing conditions and the well-being of children." Background paper on housing for The Progress of Canada's Children 2001. Ottawa: Canadian Council on Social Development.


Sophie Lefebvre is with the Labour and Household Surveys Analysis Division. She can be reached at (613) 951-5870 or

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