Homeowner-renter dwelling, neighbourhood and life satisfaction gaps

Abstract

On average, individuals who own their dwelling report higher satisfaction with their dwelling, neighbourhood and life than renters. These differences may reflect a positive causal impact of ownership on satisfaction. However, these differences could also reflect compositional effects, such as differences in household, dwelling and neighbourhood characteristics. Using the 2021 Canadian Housing Survey, this study shows that these differences in satisfaction narrow substantially, or disappear entirely, upon controlling for compositional effects. For instance, the majority of the dwelling satisfaction gap between renters and owners could be attributed to owners being more likely to reside in single-detached dwellings, with more bedrooms, and fewer dwelling issues such as mould or pests. Similarly, the life satisfaction gap was largely tied to household composition differences such as owners being less likely to experience financial difficulties and other differences related to their health status, marital status and age. In other words, comparable individuals living in comparable dwellings and neighbourhoods report similar satisfaction levels. This finding suggests that the impact of ownership on satisfaction, if any, is relatively small. This finding does not rule out the possibility that ownership can provide other social or economic benefits.

Keywords: Housing tenure, dwelling satisfaction, neighbourhood satisfaction, life satisfaction

Author

Samuel MacIsaac is with the Social Analysis and Modelling Division, Analytical Studies and Modelling Branch, at Statistics Canada.

Acknowledgments

The author thanks René Morissette, Rubab Arim and Grant Schellenberg from Statistics Canada and Elena Simonova and Aled ab Iorwerth from the Canada Mortgage and Housing Corporation for their advice and comments on an earlier version of this paper.

Introduction

In Canada and elsewhere, owners tend to report higher housing satisfaction and overall life satisfaction than renters (Elsinga and Hoekstra?2005; Balestra and Sultan?2013; Zumbro?2014; Foye?2017; Fonberg and Schellenberg?2019; Brown et al.?2021). In 2021, nearly three-quarters of Canadian owners rated their dwelling satisfaction an 8 or higher on a 0-to-10 scale, compared with slightly over half of renters (Cheng 2023). Despite somewhat narrower gaps in neighbourhood satisfaction by housing tenure, similar gaps carried over to respondents’ ratings of their overall life satisfaction. However, these satisfaction gaps consider only a small number, if any, of the potential differences in the personal, dwelling and neighbourhood characteristics between renters and owners, and they may not be attributable to ownership.

Evidence suggests there are economic benefits to homeownership, such as increased consumption, consumption smoothing or facilitated investments in riskier portfolios (Sodini et al. 2023). The potential benefits of ownership in terms of satisfaction are less clear. If ownership were causally linked to higher dwelling, neighbourhood and life satisfaction, the rising proportion of tenants (Statistics Canada?2022) could be weighing on Canadians’ well-being. Instead, this article suggests that differences in satisfaction between owners and renters may largely be attributable to compositional differences—meaning differences in dwelling, neighbourhood or household characteristics—between both groups rather than benefits of ownership as such. This finding has important implications in housing tenure decisions and debates on the benefits of ownership.

Several factors could explain these differences in satisfaction. Owning one’s dwelling may increase satisfaction if individuals have a preference to possess real estate or land (Lindblad and Quercia?2015), experience increased well-being as a result of the higher social standing (Foye et al. 2018), or benefit from a sense of middle-class identity and social conformity (Colic-Peisker and Johnson?2010). Additionally, owning one’s dwelling may increase satisfaction if individuals perceive greater residential instability associated with having to move (e.g., following a rent increase) or being forced to move (e.g., following the conversion of rented dwellings into condominiums) when renting, compared with the risk of mortgage default or higher costs associated with rising interest rates. Several studies show that renters face higher rates of housing instability (Desmond?2012; Mason et al. 2013; Lindblad and Quercia?2015; Aarland and Reid?2019) and that rents typically increase substantially during tenant turnover (Gorski 2023; MacIsaac 2023). In such cases, homeownership would have a positive causal impact on satisfaction.

However, the differences in satisfaction between renters and owners may also reflect compositional effects, i.e., differences in the types and quality of dwellings (e.g., shortage of space and adequacy of amenities) or neighbourhoods in which they reside (e.g., safety and noise levels) or differences in their socioeconomic characteristics (e.g., their income) (Balestra and Sultan?2013). For example, renters may be more likely to be in core housing need or live in dwellings with more problems such as mould (Cheng?2023) and lower-income neighbourhoods (Stick, Schellenberg and MacIsaac?2023) than owners. Similarly, these differences could also reflect demographic dissimilarities and life-cycle patterns whereby young individuals with lower incomes and recent immigrants disproportionately rent and report lower dwelling satisfaction (Fonberg and Schellenberg?2019; Cheng?2023).?

Testing whether dwelling ownership affects individuals’ satisfaction is challenging given the difficulty of causally tying ownership to satisfaction outcomes. However, assessing the degree to which the aforementioned differences in dwelling, neighbourhood and life satisfaction remain after controlling for compositional effects is feasible if available data include a rich set of dwelling, neighbourhood and individual characteristics. The goal of the article is to provide such an assessment, using the 2021 Canadian Housing Survey (CHS).

The study contributes to the literature on the link between ownership and satisfaction in two main ways. Previous studies linking ownership to satisfaction have generally focused on overall life satisfaction (Zumbro 2014; Foye et al. 2018) or housing satisfaction (Elsinga and Hoekstra?2005; Balestra and Sultan?2013), with the latter combining both dwelling and neighbourhood satisfaction effects. However, few studies integrate dwelling, neighbourhood and overall life satisfaction into a unified empirical framework. This study achieves this goal. By using a richer set of controls than those used in most previous studies, it enables a more rigorous comparison of renters’ and homeowners’ satisfaction.

Data and methods

This study uses the 2021 CHS, which provides valuable information on housing conditions and residents’ dwelling, neighbourhood and life satisfaction. The survey prioritized completion by the household member with the most knowledge of the household’s housing situation. The 2021 CHS has an overall response rate of 47%. Data were collected for Canada’s 10 provinces and the territorial capitals of Whitehorse, Yellowknife and Iqaluit, with household weights ensuring the sample remains representative of the broader Canadian population. Results in this article pertain to households rather than individuals but are presented referring to renters (renter households) and owners (owner households, where at least one household member owns the dwelling as their primary residence) for ease of presentation.

Survey respondents were asked to evaluate their satisfaction with their dwelling, neighbourhood and life overall on a scale from 0 (lowest) to 10 (highest). Table?1 provides a summary of the distribution of their responses disaggregated by housing tenure. A clear pattern is observed whereby renters report the lowest average satisfaction scores across the three measures and owners without a mortgage report the highest scores.

The context in which the survey was administered is vital to interpret results appropriately. The 2021 CHS data—collected from January 4 to June 2, 2021—should be interpreted within the context of the COVID-19 pandemic.

Physical distancing, isolation and other pandemic-related health measures likely affected satisfaction measures across different dwelling, regional, demographic and socioeconomic characteristics. Consequently, the results may mirror those of other social and well-being studies whereby certain groups, such as younger individuals, were disproportionately affected during this period (Helliwell et al. 2022; Henseke et al. 2022).

The remainder of this study is divided into five parts. The first three parts explore dwelling, geospatial, and socioeconomic and demographic characteristics by housing tenure. The fourth part presents multivariate analyses to better understand how these characteristics are associated with the three types of satisfaction, including a separate decomposition analysis of the factors that explain the satisfaction gaps by housing tenure. The final section concludes with a brief discussion of salient findings.

Dwelling characteristics by housing tenure

Differences in the satisfaction reported by renters and owners may reflect differences in the types and quality of dwellings in which they reside. In terms of quality, renters were considerably less satisfied than owners with virtually every aspect of their dwelling included in the CHS—in particular temperature control, soundproofing and dwelling condition (see Table 2 ). Among owners, those without a mortgage reported substantially higher satisfaction than renters and owners with a mortgage. Renters were also far more likely than owners to report issues with mould and mildew, pests, and indoor air quality, although the extent to which the two groups reported that their dwelling is in need of major or minor repairs differed less.

In terms of size and type of dwelling, 65% of renters, compared with 11% of owners (with or without a mortgage), resided in apartments, with most of this difference reflected in the larger share of owners residing in single-detached houses. And while 27% of renters lived in a dwelling with three or more bedrooms, almost three times as many owners did so, at 75% among those without a mortgage and 80% among those with a mortgage.

Neighbourhood characteristics by housing tenure

Differences in satisfaction reported by renters and owners may reflect the types of neighbourhoods in which the two groups reside. Larger shares of renters than owners lived in large urban areas and in more densely populated neighbourhoods. In 2021, 71% of renters lived in urban environments with 100,000 or more residents, compared with 57% of owners with a mortgage and 50% of owners without a mortgage (Table?3 ). Moreover, renters were more likely to live in closer proximity to services and amenities than owners. Merging the 2021 CHS data with Statistics Canada’s proximity measures dataset (Alasia et al. 2021) shows that a larger proportion of renters than owners lived within 1 or 1.5 kilometres of various amenities, such as health facilities, pharmacies, education services, grocery stores, parks, public transit and libraries.

Despite living closer to services and amenities, renters reported lower satisfaction with other aspects of their neighbourhood. A larger proportion of renters than owners reported problems such as noise, litter, illegal activity, pollution and abandoned buildings in their neighbourhood (Table?3). This finding may reflect differences in neighbourhood income, because the average renter lived in a neighbourhood where the median adult-equivalent adjusted (AEA) family income was $43,000, and the average owner with or without a mortgage lived in a neighbourhood where the median AEA family income was $55,000.

Household characteristics by housing tenure

The satisfaction expressed by renters and owners may also differ because of the socioeconomic and demographic characteristics of the individuals in these groups.

Renters reported lower socioeconomic and health outcomes than owners. In 2021, 36% of renters had a household income in the bottom quintile and 6% in the top quintile (Table?4). By contrast, 7% of owners with a mortgage were in the lowest quintile and 33% in the highest quintile. Moreover, renters spent a larger portion of their income on shelter costs, with 31% of renters spending 30% or more of their income on shelter, compared with 22% of owners with a mortgage and 8% of owners without a mortgage. Renters and owners without a mortgage had higher proportions of individuals reporting low health compared with owners with a mortgage. This could partly reflect differences in the age composition of each group (see Table?4 ).

Financial difficulties also varied considerably by housing tenure. In 2021, 29% of renters reported experiencing financial difficulties in the last 12 months, compared with 21% of owners with a mortgage and 10% of those without a mortgage.

Demographic characteristics also differed by housing tenure. This matters given the demonstrable link between age, marital status and other characteristics and well-being outcomes (Fonberg and Schellenberg?2019; Stick, Schellenberg and MacIsaac?2023; Cheng?2023). Owners without a mortgage were typically older, with over half of respondents aged 65 and older. By contrast, owners with a mortgage were concentrated in the middle of the age distribution (88% of owners with a mortgage were aged 25 to 64), and renters were more evenly dispersed across age groups. A larger proportion of renters identified as having never been married and not living common law (36%) compared with owners with or without a mortgage (12% and 14%, respectively). Similarly, 46% of renters lived alone, compared with 17% of owners with a mortgage and 30% without a mortgage.

There were notable differences across population groups. Indigenous people were more likely to be renters than the remainder of the population, especially in the case of First Nations people, most of whom lived in rented dwellings. People identifying as Métis had a somewhat more comparable ownership rate to that of the wider population.

Ownership varied substantially across immigrant status. Respondents not born in Canada had a higher tendency to rent. Ownership also varied across population groups. Respondents identifying as Chinese had the highest ownership rate, followed by those identifying as White or Japanese. By contrast, respondents identifying as Black, Latin American, Filipino, Arab or Korean disproportionately rented. Black respondents accounted for approximately 5% of renters, compared with 2% of owners with a mortgage and 1% without a mortgage.

A somewhat larger portion of renters (52%) identified as women, compared with owners (48%).

On average, renters and owners without a mortgage had occupied their current dwelling for a shorter time. Over three-quarters of owners with a mortgage reported having always lived in their current dwelling or having lived there for 10 or more years, compared with less than half of renters and less than one?quarter of owners without a mortgage.

Overall, various differences in dwelling, neighbourhood and individual characteristics were observed between renters and owners. A pattern of lower satisfaction with various dwelling and neighbourhood attributes—such as smaller dwellings with more issues, including poor air quality or mould—and lower median neighbourhood incomes emerged for renters compared with owners. Moreover, renters were disproportionately younger, single and likely to have faced financial difficulties in the past 12 months, which could be factors underlying differences in dwelling, neighbourhood and overall life satisfaction based on housing tenure.

Multivariate analysis of satisfaction gaps by housing tenure

The paper now turns to the roles that these characteristics play in explaining the differences in dwelling, neighbourhood and life satisfaction among groups using a decomposition analysis. This multivariate approach enables the study of the individual effect of each characteristic holding all other characteristics constant.

The Kitagawa–Oaxaca–Blinder twofold decompositions in Table?5 depict the portion of the satisfaction differences between renters and owners explained by differences in observed characteristics (i.e., observed differences in dwelling, neighbourhood and household characteristics). Three decomposition models are presented in Table?5, each decomposing dwelling, neighbourhood and life satisfaction differences. Each model decomposes satisfaction differences by household, dwelling and neighbourhood characteristics. The result is a total of nine decompositions. The first decomposition model compares renters and owners overall. Given the important dwelling type differences across renters and owners, the second decomposition acts as a robustness check and compares the same two groups for multi-unit type dwellings (i.e., excludes single-detached, mobile and “other” housing types). The third decomposition examines only the owners with a mortgage compared with renters, given the more comparable financial situation of both groups (i.e., excluding the owners who have no shelter payments other than property taxes and amenities).

The objective of the decomposition analysis is to explain the difference in the average renter satisfaction and average owner satisfaction if several characteristics are held constant. As such, coefficients represent the portion of the difference that can be explained by each characteristic. Otherwise stated, the satisfaction gap between the two groups would narrow by the coefficient amount. For example, in the first column of Table?5, the explained difference summed across all characteristics would reduce the dwelling satisfaction gap between owners and renters from 0.90 to 0.06 points on a 0?to?10 scale. In this example, nearly all the gap can be interpreted as being correlated with compositional characteristics.

In the first renter and owner decomposition model, the independent variables (i.e., dwelling, neighbourhood and household member characteristics) explain a substantial percentage of the difference across the three satisfaction metrics. Expectedly, dwelling characteristics explain over half (62%) of the difference in dwelling satisfaction, primarily the number of bedrooms, dwelling issues and dwelling type. Other variables, such as financial difficulties, proximity to services and amenities, age, and general self-assessed health, explain a further one-third of the difference in dwelling satisfaction among renters and owners.

Similarly, differences in dwelling and neighbourhood characteristics explain the lower neighbourhood satisfaction of renters compared with owners. But in this case, dwelling, neighbourhood and household characteristics explain more than the difference (147%), implying that results would invert and renters would have higher neighbourhood satisfaction than owners if these characteristics were held constant. The leading explanatory factors are dwelling issues, neighbourhood income, and proximity to services and amenities.

The model also explains the difference in overall life satisfaction between owners and renters. While dwelling and neighbourhood variables contribute to explaining the life satisfaction gap by housing tenure, two-thirds of the difference is explained by personal and socioeconomic characteristics. The variables explaining the largest portion of the gap are financial difficulties, general health, marital status, dwelling issues and age.

The second renter and owner robustness decomposition model compares owners and renters in multi-unit dwellings. This model excludes differences in satisfaction between the two groups associated with the far greater prevalence of single-detached houses among owners than renters. This narrower comparison substantially reduces the difference explained by dwelling type and proximity to services and amenities. These results reflect the fundamental differences in the composition of owned versus rented dwellings, with the former being predominantly detached housing that is on average further away from municipal services and amenities. Otherwise, results largely mirror those of the first decomposition, and the model is robust.

The third renter and owner with a mortgage decomposition model compares the satisfaction outcomes of renters and those of owners with a mortgage. Given the counterfactual nature of decomposition analysis, it is more realistic to focus on current renters who can potentially afford to buy a property with a mortgage than the counterfactual choice between renting and ownership without a mortgage. As such, the exclusion of owners without a mortgage makes for a more meaningful comparison between renters and owners who have more comparable shelter costs. Excluding single-detached and “other” dwellings (as for the second renter and owner decompositions) yields somewhat weaker explanatory power,yet confirms the overall robustness of the findings.

As expected, the differences across satisfaction measures are smaller because of the exclusion of owners without a mortgage, who report higher levels of satisfaction, on average. While results largely resemble those comparing renters and owners, financial difficulties remain a valuable explanatory factor despite both groups facing more comparable shelter costs. Markedly, though age no longer explains differences between renters and owners as when including older owners without a mortgage, marital status accounts for a more substantial difference in satisfaction between groups. However, it could also reflect the higher average life satisfaction of married or common-law individuals more generally (Stick, Schellenberg and MacIsaac?2023).

Conclusion

On average, individuals who own their dwelling report higher satisfaction with their dwelling, their neighbourhood and their life than renters. These differences may reflect a positive causal impact of homeownership on satisfaction. However, these differences could also reflect compositional effects, such as differences in household, dwelling and neighbourhood characteristics.

Studies linking dwelling ownership and satisfaction that do not account for compositional effects risk overstating the benefits of ownership. Using the 2021 CHS, this study shows that these differences in satisfaction narrow substantially, or disappear entirely, upon controlling for compositional effects. In other words, comparable individuals living in comparable dwellings and neighbourhoods report similar satisfaction levels. If observationally equivalent owners and renters have similar intrinsic levels of satisfaction, this finding suggests that the impact of homeownership on satisfaction, if any, is relatively small. Differences in satisfaction appear to largely reflect differences in living situations and circumstances as opposed to ownership as such. Importantly, this finding does not rule out the possibility that homeownership provides other social or economic benefits.

In Canada, there are ongoing concerns about housing supply—specifically, whether it meets the demand for shelter and whether the types of dwellings supplied meet the potentially varying needs of renters and owners alike. Evidence suggests that the quality of dwellings and neighbourhoods of renters may differ substantially from that of owners. Moreover, rentals appear to be more concentrated in areas with lower median incomes. Further research should examine these differences in the supply of new housing, the concentration of certain types of dwellings in specific areas and the implications for income-mixing. The types of housing supplied could influence the satisfaction outcomes of Canadians.