The housing experiences of new Canadians: Insights from the Longitudinal Survey of Immigrants to Canada (LSIC)

1. Introduction: Immigration to Canada, past and present

1.1 Introduction

In the past, most newcomers came to Canada from Europe. They sought the plentiful opportunities that existed here, such as employment opportunities, affordable real estate, and better lives for themselves and their children. Canada, like other immigrant destinations, was a land of opportunity, and attracted millions of newcomers with the promise of a better life.

Most of the time, those who uprooted their lives, and those of their families, to come to Canada found what they were looking for; jobs were plentiful, housing was affordable, and people by and large welcomed them and their children. As a result, newcomers to Canada melded into Canadian society with relative ease, and found many of the opportunities they were hoping for.

By comparison, immigrants to Canada today differ in several important respects, as do their integration experiences. First, they are now largely non-European and predominantly non-white, which potentially distinguishes them from the host society over a longer term (Boyd 2003); second, they no longer stand on the doorstep of a ‘frontier-economy’, so the opportunities of yesteryear may not exist to the same extent that they did in the past; third, they hold different market skills, and are therefore positioned differently in the labour market relative to the Canadian-born. These changes, alongside numerous others, are altering the processes of immigrant integration into Canadian society.

Heretofore, when researchers try to determine how ‘new’ the experiences of Canada’s immigrants today are, they focus on labour market outcomes, like income (Baker and Benjamin 1994; Frenette and Morissette 2003; McMullen 2009), employment status (Worswick 1996; McDonald and Worswick 1997; Gilmore 2009), occupational attainment (Frenette et al. 2003; Green 1999; Boyd and Thomas 2001; Zietsma 2010), or even remittance behaviour (Houle and Schellenberg 2008). Another research vein looks at immigrant spatial distribution and residential patterns (Hou 2004; Fong and Wilkes 2003; Myles and Hou 2004; Hou 2007; Houle 2007; Ostrovsky, Hou, and Picot 2009), often equating spatial integration with socioeconomic integration.Footnote 1

This report combines these two research areas by using the Longitudinal Survey of Immigrants to Canada (LSIC) to look at housing, another central aspect of the immigrant settlement process. Although housing relates to both spatial and economic positioning in Canadian society, it captures facets of the immigrant experience that other factors do not. Housing, particularly if owned, is a vital component of financial security (Alba and Logan 1992; Hou 2010). Second, it is fixed geographically, and looking at the type, quality, and location of a dwelling not only speaks to the spatial positioning of an immigrant household, but also its access to amenities (Henry 1989). Finally, housing signifies an immigrant household’s commitment to their new community and society (Alba and Logan 1992; Haan 2007). Housing therefore represents a mechanism for generating (or preventing) socioeconomic stratification, capturing an element of the immigrant experience that other outcomes cannot.

This report focuses on several housing characteristics of a recent cohort of immigrants in their early years in Canada. It looks at housing expenditures, residential pathways, and how newcomers that buy a home in the early years are able to afford to do so. The structure of this report is as follows: first, the section below contains more detailed information on how immigrants to Canada and their reception has changed over time, and how these changes might affect their residential experiences. Then, a detailed analysis of affordability appears, followed by a discussion of the correlates of ownership. The report concludes by discussing some policy implications.

1.2 Canada’s changing immigrant population

Immigration researchers interested in understanding the process of integration into Canadian society are fortunate to have a long theoretical legacy to draw upon, relying on research in both Canada and the United States. In Canada, the work of John Porter and Burton Hurd are formative, whereas early US researchers like Robert Park and Ernest Burgess largely based their conclusions on the experiences of immigrants who arrived in their host country in the late 1800s and early 1900s. This work focuses on the largely poor and uneducated migrants that chose to settle in a handful of Canadian and US cities. These newcomers were ‘hand-picked’ from a short list of countries, and as a result, were fairly homogenous, at least when compared to immigrants today.

By and large, the expectation for these newcomers was a gradual process of diminishing differences from the mainstream population. In the words of Park and Burgess, the expected trend was:

a process of interpenetration and fusion in which groups acquire the memories, sentiments and attitudes of other persons and groups and, by sharing their experience and history, are incorporated with them in a common cultural life.
(Park and Burgess, 1921: 735)

Although not referring to any one outcome in particular, this early work is paradigmatic, and has since then been used by countless researchers to help them understand how immigrants incorporate into their host society.

As mentioned above, however, these early theories were based on the experiences of predominantly white European migrants, who were, for the most part, physically indistinguishable from their host society. Beginning in the 1960s, most immigrant receiving countries (including Canada) began to drop their country-specific immigrant-intake policies in favour of ones based on merit and humanitarian concerns (see Rekai (2002) or Borjas (1991) for a review of these policies). One of the major consequences of this change has been a movement away from Europe to the rest of the world as the primary source for new immigrants, greatly increasing the proportion of non-white immigrants (Figure 1-1).

Figure 1-1: Visible minority composition of recent immigrant household heads in Canada’s 7 largest CMAs, 1971-2001

Visible minority composition of recent immigrant household heads in Canada’s 7 largest CMAs, 1971-2001

As Figure 1-1 shows, in 1971 (the first year in which Europe was supplanted by the rest of the world as the source for Canadian immigrants (Troper 2003)), approximately ¾ of all recent (≤ 5 yrs) Canadian immigrants were white. Over the next 20 years, however, this proportion declined steadily, so that by 1991 only about ¼ of recent arrivals (those that arrived in 1986-91) were white, with sizeable Black, Chinese, and South Asian populations making up the difference. This proportion has remained approximately stable since then.

1.2.1 How might changes in visible minority composition affect residential experiences?

Several researchers (Myles and Hou 2004; Zhou 1997; Boyd 2003) believe that the changes in the ‘colour’ of immigration shown in Figure 1-1 above may result in different integration experiences. Unlike the original theoretical formulations mentioned above, where the forces of change can be expected to eradicate divisions between immigrants and the host society (Hirschman 1983), the diversity of new immigrants challenges theoretical orthodoxy by introducing the prospect of long-term structural/institutional barriers to the life chances of new arrivals.

The primary motivation for reconsidering baseline theories is that immigrants of the past were largely identifiable by cultural and linguistic, but not physical, differences. Now, in addition to these ‘secondary barriers’ (Murdie et al. 1999) are more enduring physical, or ’primary’, barriers to permanently distinguish immigrants from the native-born. Consequently, even after adopting the conventions of the host society, many immigrants today can be distinguished from their (still predominantly white) Canadian-born counterparts. At the same time, visible minority populations are growing rapidly, and are expected to more than double by 2031. In Toronto, this will mean that visible minorities will together outnumber the non-visible minorities. This is further reason to reconsider the integration frameworks of the past.

Although a considerable amount of the research on the immigrant experience today focuses on skin colour (‘visible minority status’ in Canada, or ‘race’ in most other countries), this is by no means the only thing that is ‘new’ about immigrants today. New immigrant entrants can be classified by their age, categories of admission, levels of education, income, wealth, and source region.

As this relates to housing, several questions emerge. First, do immigrants to Canada today have different residential experiences, based on their growing diversity? Second, if housing outcomes differ, can they be explained by factors that co-vary with the distinguishing features mentioned above or are differences explained by factors such as culture and preference? Finally, do the results support or detract from traditional integration expectations? Although this report will only be able to partially answer these questions, and for only one immigrant arrival cohort, they motivate the entire report. Descriptive results in section two are organized according to these ‘new’ aspects of diversity, whereas section three will identify the impact of all of these factors in a multivariate framework.

1.2.2 Changes in Canada’s housing market

When studying housing, it is necessary to also look at the host of market-level factors that affect the experiences of Canadian immigrants. Key among these is government policy around issues like down-payment requirements and mortgage lending rates. Policies like the National Housing Act (NHA), which launched an effective public housing program (1964), an assisted home ownership program (1973), a housing rehabilitation program (1973), and a non-profit and co-op housing program (1973), directly affect Canada’s housing market, by providing affordable options to home-seekers.

In more recent years, many of these supportive policies have been withdrawn, making Canada’s housing market one of the most private of any liberal democracy (Hulchanski 2006). Although there are supportive policies in place, like the First-Time Home Buyers’ (FTHB) Tax Credit, the Home Renovation Tax Credit (HRTC), and the Home Buyers’ Plan (HBP), these incentives are unlikely to shape the buying behaviour of newcomers for several reasons. The FTHB credit provides first-time buyers with a tax credit of up to $750 to help defray the initial costs of purchasing a home (legal fees, disbursements and land transfer taxes, etc.), and it is likely to be too small to dramatically affect the decision to buy versus rent. The HRTC is designed to soften the costs of a renovation, thereby impacting homeowners only, not those contemplating a purchase. The HBP allows first-time homebuyers to withdraw up to $25,000 from their Canadian RRSP contributions and use the amount for a down-payment on a new home. Since newcomers to Canada have probably not had an opportunity to build RRSPs in Canada, they will likely not benefit greatly from the program. Given that these are the three primary housing policies in Canada, it is fairly safe to say that most immigrants must rely primarily on the private market to satisfy their housing needs with little governmental assistance. Furthermore, these policies do not provide support for immigrants (or anyone else) who does not want to buy a home, or upgrade one that they already own.

1.2.3 Changes in Canada’s mortgage market

Although housing policies may not affect the immigrants in the LSIC sample, mortgage rates likely will. Mortgage rates have fluctuated dramatically in recent history (Figure 1-2), and have an appreciable effect on housing affordability, and an immigrant household’s decision to buy versus rent.

Figure 1-2: Average Canadian yearly mortgage rate 1951-2005, five year term

Average Canadian yearly mortgage rate 1951-2005, five year term

To illustrate with an example, for a $200,000 home (25-year amortization) with a 7% interest rate, monthly mortgage payments would be roughly $1,400 plus property tax and utilities. A similarly priced home at 18%, which is what rates spiked at around 1981 (Figure 1-2), would be $2,930, or more than twice the amount under a 7% interest amount.

Clearly, immigrants that arrived under one mortgage interest rate regime would have had very different experiences in Canada’s housing market had they come under another, as would all new buyers. To further hamper affordability, the home that would have been purchased in 1981 needed a minimum 10% down-payment, a requirement that has been relaxed in recent years. Furthermore, mortgage interest rates have remained fairly stable in recent years, and since the LSIC sample more or less entered Canada at the same time, they face similar, historically low, interest rates. As this relates to expectations of integration, we might expect that this will benefit anyone interested in buying a home that does not have the money to buy a home outright.

Offsetting the positive effects of historically low interest rates are increases in the price of housing itself. Although certainly not everyone wants to own their home, those that do have faced a deterioration in affordability over time (Figure 1-3).

Figure 1-3: Owner-occupied housing prices, Toronto, 1966-2011

Owner-occupied housing prices, Toronto, 1966-2011

As Figure 1-3 shows for Toronto (where roughly 40% of all immigrants to Canada have settled in recent history), the price of housing has been steadily creeping up since at least 1966. Although recent trends in mortgage interests have mitigated against this increase somewhat, there has still been long-term decline in the affordability of owner-occupied housing. This not only shapes access levels for new buyers, but even for those that wish to remain tenants. The trends above contribute to an affordability crunch, since rents usually increase alongside owner-occupied dwelling appreciation (OECD 2005). Housing price trends over time therefore provide an indication of what is happening in the rental market (Arnold and Skaburskis 1989).

As this pertains to immigrants in the LSIC sample, Figure 1-3 shows that immigrants now live in more expensive housing (owned and rented) than they did in the past. Given that this is the case, households that rent upon arriving in Canada may have more difficulty saving funds for a down-payment than they did in the past, suggesting that transitions to ownership will be more gradual than it was in the past. Although this is true in Canada generally, several metropolitan housing markets have particularly experienced general declines in affordability. Top among these locations are Toronto and Vancouver, the two top destinations for immigrants in the LSIC sample and immigrants more generally (Hou 2007). At the same time, LSIC respondents that choose to buy receive some of the lowest mortgage interest rates of the past 50 years (Figure 1-2), offsetting some of the price increases demonstrated in Figure 1-3, and suggesting that they may be prompted to buy because borrowing money is now ‘cheaper’.

1.3 About the Longitudinal Survey of Immigrants to CanadaFootnote 2

As part of adapting to life in Canada, many immigrants face challenges such as finding suitable accommodation, learning or becoming more fluent in one or both of Canada’s official languages, participating in the labour market, accessing education and training opportunities, and securing appropriate accommodations. The results from the Longitudinal Survey of Immigrants to Canada (LSIC) provide indicators of how immigrants are meeting these and other challenges. While integration may take many years, the LSIC is designed to examine the first four years of settlement, a time when newcomers establish economic, social and cultural ties to Canadian society. To this end, the objectives of the survey are two-fold: to study how new immigrants adjust to life in Canada over time, and to provide information on the factors that can facilitate or hinder this adjustment.

The Survey was designed to provide information on how new immigrants adjust to life in Canada and to understand the factors that can help or hinder this adjustment. The data allow researchers to evaluate the current services available and help improve them. Topics covered in the survey include language proficiency, education, foreign credential recognition, employment, health, values and attitudes, the development and use of social networks, income, and perceptions of settlement in Canada.

As it pertains to housing, there is considerable information on affordability, suitability, and appropriateness, making it an excellent resource for studying this aspect of immigrant integration. Researchers can use the data to look at the residential experiences of immigrants at time of arrival, and how these experiences change over time spent in Canada.

1.4 LSIC and generalizability

Except for some native-born comparison data from the census, this report relies almost exclusively on the LSIC as a data source. LSIC is a three-wave study of 12,040 people aged 15 and over (at wave 1) who were randomly selected from the approximately 165,000 immigrants who settled in Canada between October 2000 and September 2001. Respondents were interviewed at six months, 2 years, and 4 years after arrival, and to be part of the LSIC sample, respondents needed to have applied for admission to Canada through a mission abroad (Statistics Canada 2003).

The LSIC sample was created using a two-stage stratified sampling method. The first stage involved the selection of Immigrating Units (IU) using a probability proportional to size method. The second stage involved the selection of one IU member within each selected IU. The selected member of the IU is called the longitudinal respondent (LR). Only the LR is followed throughout the survey. This report reduced the full LSIC sample to contain only respondents with valid information on housing variables of interest, removing roughly 100 observations from the 7716 respondents that were present in all three waves of the sample.

Although an excellent dataset, there are some limitations with LSIC that are worth noting. First, attrition rates are noteworthy, with only 9500 and 7716 people participating in waves 2 and 3 respectively (down from 12,040 in wave 1). One of the consequences of sample attrition is that there may be a growing bias in the sample across waves. This could be especially true when comparing across immigrant classes where refugees can hardly return to their country of origin or move on to another country, where economic classes can, which may exaggerate differences. Even though Statistics Canada adjusts weights to maintain representativity, there is likely to be unobserved differences between those that remain in the sample and those that do not. In addition, it is difficult to know the proportion of respondents who dropped out because they have returned to their country of origin or re-migrated to a third country, or whether they have remained in Canada and cannot be traced. This report looks only at respondents who were present in all three waves and readers are urged to keep this in mind when reading the results.

Unlike some Statistics Canada surveys, LSIC does not permit proxy interviews. The one exception to this is the module on income, where the person in the household (whether or not they are the respondent for the rest of the survey) most knowledgeable about the subject is asked to respond. Otherwise, no interview may be conducted by proxy. The recorded values are based on the interviewee’s response, and no information is taken from other data sources (such as tax records). Some consistency editing occurred with income responses, but were largely limited to instances where individual income exceeded economic family income, or of partial non-response.

There are other factors that potentially complicate how representative LSIC is. First, only Government Assisted and Privately Sponsored Refugees (not successful asylum seekers) compose the Refugee category in LSIC, thereby omitting a portion of Canada’s total number of refugee claimants.

Additionally, LSIC contains information on one arrival cohort, and it would be presumptuous to assume that the findings from this unique sample apply equally to those that arrived before or after LSIC respondents. At the same time, there are no doubt insights to be gained from this sample that will hold some relevance for immigrants today.

In summary, LSIC is Canada’s pre-eminent source for data on the dynamics of settlement, and represents an important resource for understanding an immigrant’s early years, including their housing experiences. In section two below, we first look at housing affordability among LSIC respondents, before trying to explain differences between groups in section three. The primary focus in section two is on housing costs, and whether this amount differs by ownership status, census metropolitan area, visible minority status, and category of admission.Footnote 3

1.5 A note on the unit of analysis

Although housing outcomes can be linked to individual characteristics (gender, income, marital status, etc.), most times it is more useful to think of it as a household-level resource, suggesting that it is household level factors that should be used to explain housing outcomes. Quite often, it is families (however defined) that make residential choices, and it is often also these people that contribute payments for the dwelling. Given this, very little information between individual characteristics and housing is provided in this report.

For the same reason, income is not measured at the individual level but rather that of the level of the economic family, where an economic family is defined by Statistics Canada as

a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law or adoption. A couple may be of opposite or same sex. Foster children are included. By definition, all persons who are members of a census family are also members of an economic family. Examples of the broader concept of economic family include the following: two co-resident census families who are related to one another are considered one economic family; co-resident siblings who are not members of a census family are considered as one economic family; and, nieces or nephews living with aunts or uncles are considered one economic family.Footnote 4

There are some necessary exceptions to looking at household characteristics. Visible minority status and source region are not measured for each household member, but only for the longitudinal respondent in the LSIC. Given the policy interest in differences across these groupings, however, the characteristics of the longitudinal respondent are assumed to represent the entire household.

All dollar figures in this report are stated in 2002 dollars, adjusted using the Bank of Canada’s 2002 Total CPI deflatorFootnote 5. All other coding information for the variables used in this report can be found in Appendix C.

1.6 A note on terminology

For the purposes of style and brevity, several terms are used interchangeably in this report. First, LSIC respondents were interviewed three times: after roughly six months in Canada, then again after two and four years. Since it would be cumbersome to describe the interviews according to the amount of time that has elapsed for a respondent in Canada, these interviews are at times often referred to in shorthand as waves 1, 2, and 3. Also, since LSIC contains some retrospective information on experiences and resources immediately at arrival, there is essentially another synthetic wave of data for time at arrival. This synthetic wave is referred as ‘wave 0’.

Second, assimilation, incorporation, integration, and settlement are used as parallel terms in this report. In Canadian immigration research, the primary convention is to use ‘integration’ in place of synonyms (particularly assimilation). Third, an affordability constraint is defined as any situation where an economic family is spending more than 30% of its total income on shelter. This definition is consistent with that of Statistics CanadaFootnote 6 and the US census bureauFootnote 7, and is therefore often used in housing research.

Finally, ‘household’ is used to refer to economic family. Ideally, more information would be measured at the level of the household (particularly financial information) instead of the economic family in the LSIC even though households and economic families are often very similar in composition. Once again, the term ‘household’ is used to improve the flow of the report, even though there are some (instances where the terms household and economic family are not synonymous).

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