“The disparity between the the cost of owning and the cost of renting is worse than it has ever been.”

This story of a renter (who could be an owner but chooses not to) from Markoz at vancouvercondo.info 2008-04-12 07:01:05

“One stat I found very interesting is “shelter cost to income ratio” (STIR) which they split between renters and owners. Curiously, in Vancouver from 1990-2001 owners spent an average of 20% of their income on shelter while renters spent an average of 30%. Presumably this is due to the fact that average owners make (a lot) more money than average renters. Anecdotally, anytime I personally have considered getting into the market my STIR would have increased dramatically. Due to my income, I guess I am not an average renter. It has always been the huge disparity between the cost of owning and the cost of renting that has deterred me. (That, and shoddy workmanship/design). Currently that disparity between the the cost of owning and the cost of renting is worse than it has ever been. I rent an old house just west of Main for $2050 per month. A virtually identical property just 2 doors down recently sold for $700,000. With 10% down my mortgage payments and property tax would be $4,335 per month (based on 6% and a 25 year term). The house is over 50 years old and will soon need a new sewer line (already cost estimated by a plumber at $4,200) and roof. We are in the midst (end?) of an unprecedented run up in house prices but owning has always seemed to me to command a much greater premium in Vancouver than other cities I have read about.

Will be archived here: 09. Delaying Buying (archive)

4 responses to ““The disparity between the the cost of owning and the cost of renting is worse than it has ever been.”

  1. I have been flogged on the other blog for missing the point that the average owner probably has a lower STIR because the average owner has been an owner for many years. My comment referenced a StatsCan analytical paper that another poster had directed me to. I’m sure that is part of the issue but here is a quote from page 18 of that paper:
    Despite significant declines in their average STIRs in the late 1990s, renter households in 2001 spent a
    considerably higher proportion of their before-tax incomes on shelter than owners. In most CMAs, differences
    in the average STIRs of owners and renters amounted to 10 percentage points or more. These
    differences largely reflected underlying differences in income. In many CMAs, the average household
    incomes of owners were more than double those of renters (see Appendix Table A1.18). Although owners
    also paid more for their housing than renters, differences in the shelter costs of owners and renters amounted
    in most CMAs to between 20 and 40 percent, far less than differences in income.

  2. Thanks for the additional information, Markoz.
    I noted the debate, and also note that it doesn’t in anyway detract from the central point of your personal anecdote – that owning is currently disproportionally more expensive than renting and that you have chosen to buck the trend and rent.

  3. Homeowners spend 20% of their income on their homes? No way. If a $2000/month mortgage (for an entry level condo?) is 20%, those people are earning $10k/month, or $120K/year. I seriously doubt that.

  4. paulmct: The 20% figure takes into account the fact that some owners bought their houses at lower than current market values.

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