Canada has the third most affordable housing market globally
Beacon Staff Reporter
A new survey says heavy-handed growth management policies have led to higher housing prices and less affordable housing in many Canadian cities.
The ninth Annual Demographia Housing Affordability survey, released by the Frontier Centre for Public Policy, showed that affordable housing in Canada has been declining slowly.
The survey covered 337 metropolitan housing markets in Canada, Australia, Ireland, New Zealand, The U.K. and the U.S. including 35 Canadian markets.
Housing markets are ranked by the ratio of median housing prices to median incomes (median multiple). A median multiple under 3.0 is considered affordable housing.
It means that a house in that market would be worth the equivalent of 3 or less years of income. A score of 3.0-4.0 is moderately unaffordable, 4.1-5.0 seriously unaffordable and over 5.1 is considered severely unaffordable.
Eight Canadian markets were considered affordable in the third quarter of 2012, 17 were moderately unaffordable, four were seriously unaffordable and six severely unaffordable.
No housing market of over one million was considered affordable, though two – Edmonton and Ottawa-Gatineau – were considered only moderately unaffordable.
Calgary slipped into the seriously unaffordable category in 2012, as the median multiple increased from 3.9 to 4.3.
Twelve markets became more affordable, including Vancouver, which remains the second least affordable market in the English speaking world (next to Hong Kong), amid fears that the market is in a bubble.
As many as 18 markets saw increases in their median multiples, including Regina, Toronto, Calgary, Hamilton, Saskatoon, Edmonton, and Winnipeg.
The average median multiple for Canada was 3.6, up slightly from 3.5 in the third quarter of 2011. Internationally, Canada now has the third most affordable housing market.
While affordability increased slightly in 2012, Ireland broke out of last year’s tie for second with Canada by posting a dramatic decrease, likely due to country’s poor economic conditions.
The U.S. leads the world with a median multiple of 3.1, up from 3.0 in 2011. Australia, New Zealand, and the UK all ranked as severely unaffordable.
Looking at the decline of affordable housing in growing markets such as Calgary, Regina, and Saskatoon, one might infer that rapid population growth automatically leads to housing price increases.
In fact, rapidly growing cities such as Houston, Dallas, Atlanta, Nashville, and Charlotte, North Carolina, have all maintained housing affordability throughout their respective booms. Houston added more than 1.2 million between 2000 and 2010, yet maintains a median multiple of 3.0. Similarly, Atlanta added more than 1 million residents in that timeframe, and has the second most affordable housing market of all surveyed at 2.0.
The fact that these markets have remained affordable despite rapid growth stems from their relatively unrestrictive land use regulations. By refraining from passing on artificial costs to developers, they have allowed for housing supply to meet housing demand at a reasonable price.
In contrast, markets such as Toronto, Vancouver, Portland, and Denver, have imposed strict land use policies, and have seen steady price increase.
Growth management policies, such as the urban growth boundaries surrounding all of these cities, drive up land prices artificially, and those prices are passed on to consumers.
Download a copy of the 9th Annual Demographia International Housing Affordability Survey here.