Kathryn Hughes’ lengthy tenure as a tenant in Centretown’s elegant French-deco-styled Blackburn Building started simply enough back in 1990. A recent university graduate, she didn’t have the money to buy a house, so she rented an apartment. A quarter century later, she’s still there even though she and her husband, Alan Hughes, could have bought long ago had they so chosen. “We just really like living here,” she says when asked why they’re still renting.
That answer, of course, turns out to be more nuanced than it appears. While conventional wisdom dictates buying a house to acquire a valuable asset, a place in the community, and somewhere to call your own, the Hugheses — she’s a 40-something researcher and writer in the health technology field; he’s a 50-something hardware designer — have found all those necessities of life and more as renters. From putting their money into investments rather than real estate (“I prefer a more diversified investment strategy,” says Kathryn) to considering the neighbourhood around Somerset and Elgin, where they live, as their own, they believe they’ve come out ahead by renting rather than buying.
The Hugheses are among the 33 percent of Ottawa–Gatineau households that rent, according to the Statistics Canada 2011 National Household Survey. That number is about the same as the national average although considerably lower than the greater Montreal area, where 45 percent of households rent (a number that jumps to 64 percent for the city proper).
And while not all renters — who, in Ottawa, paid an average of $1,132 for a two-bedroom apartment in 2014, according to Canada Mortgage and Housing Corporation (CMHC) — are happy campers, those who have embraced the lifestyle are pleased to offer a smorgasbord of reasons for not owning.
Dollars & Sense
Is renting, as we’ve been told for years, tantamount to throwing away our money by handing it to a landlord instead of investing it in a house? “Definitely not,” says Scott Andison, president and CEO of Toronto-based Federation of Rental-Housing Providers of Ontario. In fact, using Ottawa market data, he calculates that if a tenant invested the difference between her monthly rent cheque and the larger amount it costs a homeowner to buy, own, and sell a house, after 25 years — the normal amortization period for a home — the renter would come out with $346,790 more in equity than the homeowner. That calculation takes into account annual increases in both rent and the value of the house.
Though Andison used conservative numbers to calculate home appreciation, return of investment, and other factors, he argues that even if he used higher estimates for these figures, the renter would still come out ahead — often jaw-droppingly so. He also points out that forecasting everything from inflation to average returns on investment will always be a bit of a guessing game.
Andison sees home ownership becoming increasingly unaffordable, especially for young people who may be carrying student debt and facing a less certain job market than did their parents at the same age. The numbers seem to support the unaffordability argument.
Statistics Canada reports that in 1990, the median income of Ottawa couples in which the older spouse was 25 to 34 years old was $50,600. By 2012, it was $84,820, an increase of 68 percent. During the same period, the median price of a new single detached house in Ottawa jumped from $187,000 to $461,900, according to CMHC. That’s a bump of 147 percent.
The unaffordability argument is not ironclad, however, nor does everyone believe that renting is automatically the smarter financial choice.
Drawing on Statistics Canada Census data, CMHC reports steady growth between 1991 and 2011 in the percentage of those under 35 who were homeowners: from 31 percent in 1991 to 44 percent 20 years later. However, those numbers may have changed by the next census, thanks to a still-sputtering economy, ballooning house prices in cities such as Vancouver and Toronto, and the federal government’s tightening of mortgage regulations in 2012.
And when Mark Roundell, a wealth manager with ScotiaMcLeod, looks at the assumptions that underpin financial projections for renters and owners, he says, “You change any one variable, and you get completely different results.” On the other hand, he notes that if you’re retired, spend part of the year out of the country, and plan to unload the family home anyway, renting may be the best option. After all, unless you have a McMansion, you’re not likely to come out very far ahead financially if you sell your house just to turn around and buy a condo with its steep monthly fees and parking costs.
In the end, says Roundell, renting or owning is a “totally personal issue”: if the rental life suits you, go for it; if staking a claim is important, then buy a house. But if you do decide to rent, be rigorous about squirrelling away that extra cash each month. “Absolutely in Registered Retirement Savings Plans if you’re at a good level of income to get the tax deduction. Tax-Free Savings Accounts are number two, especially now with the $10,000 annual limit. And third is a Registered Education Savings Plan if you have kids.”
Want to analyze rent versus buy in your own case? Online calculators abound, thanks to enthusiastic media coverage of the topic over the past few years. The New York Times calculator is comprehensive.
Social & Personal
Lauren Hunter, 26, says that she rents primarily because she can’t yet afford to buy, her bedroom-plus-den unit in an older Centretown building yields socializing opportunities less readily available to suburban homeowners. “That’s one of the main reasons I’m here. The majority of my friends live in the area, and after work we get together for drinks or go to a show.”
Andison says that such considerations are on the uptick when it comes to renting versus buying. A lot of young people want to live close to where they work and play, and that means downtown, where renting is cheaper than buying. Of course, if they start having children, they may find themselves suddenly dreaming about white picket fences and grassy backyards. That’s especially so in most of North America, where raising a family in a downtown apartment long ago vanished from our collective to-do list.
In fact, many renters say they perceive a bias against them from home-owning friends and acquaintances. It’s as if they feel that non-owners are shirking their adult responsibilities and letting down the team. “There’s definitely that mindset,” says Kathryn Hughes. “People sometimes have a hard time understanding why we’re renting, because I have a successful career and options. I try to be polite about it. For me, it’s about living well.”
Hunter, who reviews Ontario’s French-language school curriculum for a living, says she, too, feels a bias. “It’s like I’m not well established enough,” she explains. “At work, they don’t shame me, but there’s always someone talking about renovating or what the market’s like. I just can’t relate.”
Academics have taken a crack at analyzing the topic, looking at whether homeowners or renters tend to be happier and healthier. The results are mixed.
Grace W. Bucchianeri of The Wharton School of Business at the University of Pennsylvania found in a 2009 study that homeowners were no more satisfied with their lives than were renters, spent less time on active leisure or with friends, and were 12 pounds heavier. However, a subsequent literature review at Harvard University found that positive home-ownership experiences produced more social and political activity, improved psychological health, and were associated with higher high school and post-secondary completion rates.
Whatever the academics say, Madeleine Pouliot, an independent life insurance broker, has no doubts about the personal and social rewards she has reaped by renting. Currently leasing the ground floor of a large triplex not far from Island Park Drive, the 58-year-old is thrilled with her two bedrooms (one of which she sublets to help defray the rent), office, sunny living room, garage, and use of the yard, where she has cultivated a profusion of flowers and harvests a vegetable garden.
She has put a small amount of her own cash into her place, decorating the kitchen ceiling with pressed-tin-patterned wallpaper and painting the walls hot pink (“It’s very girly!” she says). It’s clearly her home, and she’s proud of it. And though she knows she could never afford to own it, that’s just fine by Pouliot, who is as skilled at tending her relationship with her landlord as she is at nurturing her relationship with those flowers.
Renting here and elsewhere around town over the past 18 years has yielded other benefits. “I’m a pretty social being,” she explains. “If you’re moving around, you meet new people. If you own a home, you’re entrenched and your neighbours are probably pretty much too. Five years later, everyone’s the same.”
And that’s another advantage of renting: mobility. Have you or your partner landed the job of a lifetime in a distant city? Has the city just approved a 30-storey condo tower right outside your living room window? Much easier to turn in the key to the landlord than to sell a house under those circumstances.
Ottawa’s Shifting — and Upscaling — Rental Market
Over the past decade, the city has seen a significant shift from the construction of purpose-built apartments to a reliance on condos for rent. In fact, CMHC says that more than 24 percent of all condos surveyed in Ottawa in 2014 were rental units. In many cases, the landlords of those units own one or two condos, which they bought with the intention of renting them out until they eventually sell them at a profit or occupy them as their own home.
You might think that those condos are gobbling up tenants in part because they offer more sleek design features and amenities than do apartments. Not necessarily so, according to Kimberley Armstrong of District Realty Management Inc., which manages some 1,500 rental units in town. She notes that their newly refurbished building at 169 Lisgar boasts granite countertops and stainless-steel appliances. Monthly rents range from $1,125 to $1,800.
The newly opened William’s Court in Kanata Lakes, meanwhile, features wood cabinetry in the suites and such common-area amenities as a fitness centre, a saltwater pool, and an 18,000-square-foot clubhouse. Rents run from $1,365 to $4,500 per month.
But while the Hugheses’ apartment doesn’t have a gym or pool, it has soaring ceilings, deep baseboards, fine old hardwood floors, and more character than most condos have ever thought about. “It’s got good, old soul,” says Kathryn. “We love our home.”
In the end, there is no right answer to the “rent or own” question. While renting can offer security and happiness, it can just as easily be the cause of a lot of stress if your rent suddenly increases or you find yourself in conflict with a landlord or fellow tenants. That said, home is where the heart is, and in 2015, one-third of Ottawa residents are finding that the “home-free” lifestyle suits them just fine.
This article originally appeared in the September 2015 print edition of OTTAWA magazine