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Canada's housing market is broken and no longer affordable for either renters or homeowners.KTStock/iStockPhoto / Getty Images

The Canadian housing market is broken. It’s no longer affordable for either renters or homeowners – but both groups still need to navigate it. Major cities are seeing rapidly increasing rents alongside decreasing property values, while Bank of Canada interest rate hikes have steadily pushed variable rate mortgage payments higher.

We are now in a full blown housing crisis, and no one who isn’t living in a paid-off house will escape unscathed. But how can young Canadians make a decision to rent or buy when both choices look so bad? The answer has as much to do with your lifestyle as it does with finances.

First we have to acknowledge that if you are planning a life in Canada, these are the only choices. Everyone needs a place to live, so unless you are moving in with mom and dad indefinitely or inheriting the family home, you need to choose between renting and owning.

Many renters look wistfully at homeowners for their stable housing costs and growing home equity, but the grass isn’t actually as green as it seems. The Bank of Canada has raised interest rates five times in 2022, and while renters might get hit with a rent increase when their annual lease comes up for renewal, homeowners with a variable rate mortgage have been grappling with rising payments all year.

Compare how different interest rates affect the cost of your mortgage

Those on fixed rate mortgages will see their payments increase as soon as it comes time to renew. For Canadians who took out their mortgages at record lows, monthly payments could surge by as much as 45 per cent.

Some new homeowners were under the false impression that buying a home was a way to stabilize housing costs, only to learn the hard way they’ve effectively been renting all along and their landlord is the bank. As housing prices have come down from their peak in February, many have found themselves underwater on their mortgages, where they owe more than what their home is worth, as their home values declined.

Staying put means continuing to pay hundreds, or even thousands of dollars, more each month. Selling can mean eating a loss of tens or even hundreds of thousands of dollars. If you’ve ever been jealous of a homeowner’s equity, remember there is nothing to admire about negative equity.

And while most people seem determined not to admit the truth, it is still cheaper to rent than own in most Canadian cities. A condo renting for $2,400 a month in Toronto retails for about $670,000 and would cost more than $4,000 a month to own after mortgage payments, property taxes, and condo fees.

In more affordable cities like Calgary and Edmonton, the gap between renting and owning closes to only a few hundred dollars a month, but renters still win when it comes to lowest monthly housing costs. If you value cash flow to fund your lifestyle or other investments, then renting still wins by a mile, even if the cost of renting is rising.

Bidding wars, cutthroat viewings and onerous applications: Stories of Canada’s red-hot rental market

Now more than ever it’s important to weigh the emotional and practical benefits of renting and home ownership. Both have become so expensive, your emotional ROI, or return on investment, will have to be the deciding factor. Home ownership provides security, predictability and the sense of permanence through “putting down roots,” something people often want when they start a family. Many people also seek homeownership to avoid the risk of being “renovicted.”

But renting provides other benefits – chiefly lower costs. As a renter, you won’t have to pay for upkeep and maintenance, for renovations or property taxes. Renters also have more flexibility and the freedom to move for a job or a partner. Which choice will serve you best depends on your personality and stage of life, as much as your money.

Fundamentally, renting or owning are lifestyle decisions more than they are financial ones. This has always been true, but the recent runup in cost for both has made it impossible to ignore. For millennial and Gen Z buyers, homeownership will likely not be the cash cow it was for their parents, so they need to pause before rushing in and carefully consider whether paying a premium for owning a home is really worth it.

Millennials and Gen Z who choose to rent can take advantage of the few extra hundred dollars renting leaves in their pocket by investing it. Now might be an ideal time to build up a down payment for a future time when they decide they want to buy – and can comfortably afford it. And if you decide you want to be a long term renter, you can do so knowing you’re not throwing money away.


Bridget Casey, MBA (Finance) is founder of Money After Graduation, a financial e-learning company. You can follow her on Instagram at @bridgiecasey and Twitter at @BridgieCasey.