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A No Vacancy sign outside a low-rise apartment building on Queen Street East in Toronto’s Beach neighbourhood is pictured on Jan. 19. Both tenants and homeowners have been facing rapidly rising housing costs, driven by record-low vacancy in the rental market and rising mortgage payments amid climbing interest rates.Fred Lum/The Globe and Mail

A quarter of Canadians wouldn’t be able to come up with $500 to cover an unexpected expense, according to a new Statistics Canada survey that also found people who are younger and racialized report higher levels of financial stress than those who are older and non-racialized.

Worry about housing-related expenses, including rent, appeared to be driving the divide. More than half of survey respondents between the ages of 15 and 34 said they were “very concerned” that they would be unable to keep up with housing costs, compared with just over a quarter of respondents aged 65 and over.

Nearly three quarters of Black respondents, and 65 per cent of South Asians, shared the same sentiment, compared with less than 40 per cent of non-racialized respondents.

The Statistics Canada results, which were based on a nationwide survey conducted in the fall, were released on Monday, the same day an Ontario-based bankruptcy trustee firm published a report showing that millennials accounted for half of consumer insolvencies in 2022, despite making up only about 20 per cent of Canada’s population according to the latest census.

Soaring rents, along with heavy student-debt loads, were the primary drivers of financial distress among Canadians between the ages of 26 and 41, said Douglas Hoyes, a co-founder of the trustee firm, Hoyes, Michalos & Associates Inc., which published its report based on its analysis of 2,700 personal insolvency filings.

Both tenants and homeowners have been facing rapidly rising housing costs, driven by record-low vacancy in the rental market and rising mortgage payments amid climbing interest rates. Those rent and mortgage bills have been squeezing family budgets at a time when inflation has sent the cost of groceries and other essentials skyward.

The resulting financial pressure is likely leaving a growing share of Canadians without wiggle room to absorb money-related shocks.

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Around one in three people between the ages of 35 and 54 said they wouldn’t be able to come up with the extra money to deal with a $500 emergency, according to the Statistics Canada survey. That compares with fewer than two in 10 among those aged 65 and older.

Half of the survey’s Black respondents and nearly four in 10 Filipino respondents said they wouldn’t be able to cope with the sudden expense.

These types of small, one-time emergency costs may be forcing a growing number of Canadians to borrow. But Mr. Hoyes said that what often forces people into insolvency are sudden increases in rent.

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In the current rental housing market, having to move and take on a new lease at the current market rate is “the killer for most people,” Mr. Hoyes said, speaking about the financial predicaments faced by many of his firm’s clients.

A recent report by the Canada Mortgage and Housing Corporation found that the average annual rental rate for a housing unit that had just switched tenants climbed by 18 per cent in the year leading up to October, 2022.

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For younger Canadians, another source of financial vulnerability is student debt, Mr. Hoyes said. That’s despite federal and provincial pandemic relief measures that paused payments or the accumulation of interest on government student loans. (Ottawa has announced plans to erase interest on federal student loans, starting on April 1.)

Many young people who carry student loans and seek to borrow more money face high interest rates, because of their overall high debt-to-income ratios, Mr. Hoyes said.

Young debtors are heavy users of what Mr. Hoyes’s firm calls “rapid loans,” a category that includes both traditional payday loans and a new breed of high-interest, longer-term loans for borrowers with bruised credit. Canadians can now easily apply and be approved for both forms of lending online.

While Generation Z Canadians between the ages of 18 and 25 still make up a small percentage of insolvency filings at his firm, Mr. Hoyes said, he expects that share to grow as the group grapples with the same housing and student-debt challenges faced by millennials.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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