Housing affordability in Canada remains an acute problem for many areas of the country. This report provides a detailed analysis of the issue, its background, and its reasons. It discusses trends in Canadian housing affordability, presents statistical data for all provinces, and addresses core housing needs. The paper concludes that British Columbia and Ontario are the areas with the lowest affordability of accommodation, while the population of Manitoba has no core housing need.
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Housing Affordability in Canada
Housing affordability in Canada may be considered a complicated issue. The reason for it is that, although most families can meet their housing requirements, the unaffordability of accommodation remains an acute problem. In Canada, housing is considered affordable if it costs less than 30% of a family’s before-tax income (Canada Mortgage and Housing Corporation, 2018). Housing affordability considers not only rental accommodation subsidized by the government but also various forms of tenure, including temporary and permanent housing, as well as all types of ownership.
The housing continuum includes emergency shelters, social and transitional housing, affordable rental accommodation and homeownership, market rental housing, and market homeownership. Currently, the federal government invests $2 billion yearly in housing (Canada Mortgage and Housing Corporation, 2019a). However, in 2011, more than 1,5 million Canadian households remained in core housing need (Canada Mortgage and Housing Corporation, 2014).
There are several government programs aimed to enhance the affordability of accommodation in Canada. One of them, the Investment in Affordable Housing (IAH), was launched in 2011 and allows for providing more than $230 million every year on housing needs (Canada Mortgage and Housing Corporation, 2019a). Under this program, representatives of Canadian territories and provinces can enhance the affordability of accommodation by funding local affordable housing programs. Another method the government uses to improve the housing situation is the National Housing Strategy (NHS) introduced in 2017.
The NHS is a decade-long plan that invests $40 billion in building accessible and sustainable homes (Canada Mortgage and Housing Corporation, 2019a). The focus of this strategy is vulnerable groups of the population. They include the elderly, women and children with a history of family violence, veterans, individuals living with disabilities and mental health illnesses, people having addiction issues, and indigenous individuals. Finally, various organizations like the Canada Mortgage and Housing Corporation offer programs aimed to provide resources and support in creating new affordable accommodations and preserving the existing ones.
It is necessary to mention that housing affordability is a serious threat to low and middle-class households. Although the government takes measures to enhance affordability, some groups of the population are still insignificant core housing needs. With the growth of the average age of the population and the increase in newcomers, the problem of sustainable accommodation has become the most acute within the past three decades (Royal Bank of Canada, 2018a). The following section of the paper addresses this issue in detail.
Trends in Canadian Housing Affordability
The primary trend in Canadian accommodation is a decrease in its availability for the majority of the population. It is possible to say that, in 2018, housing affordability reached its worst level since the beginning of the 1990s (Royal Bank of Canada, 2018a). In the second quarter of the year, the aggregate affordability measure constituted almost 55%, which was caused by rising interest rates. In comparison, in the middle of the 1980s, this measure was less than 40%. Evidence shows that to cover ownership costs, a general household in Canada would need to spend almost 55% of its income (Royal Bank of Canada, 2018b). This number varies depending on a province and territory, which will be discussed in the following section of the paper.
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Low affordability of even average-priced accommodations has resulted in various problems. For example, because of this issue, buyers started to focus on lower-priced options, such as condominium apartments. This problem, in its turn, led to strong demand for this type of accommodation and, consequently, higher prices on it. As a result, the affordability of condominium housing also decreased; its affordability measure reached more than 3,5% (Royal Bank of Canada, 2018b).
Moreover, in some areas, such as Vancouver and Toronto, it is nearly impossible for many households to enter housing markets due to extremely high accommodation prices. The report by the Royal Bank of Canada (2018b) shows that, before the 1990s, aggregate housing affordability measure was below 40% in the majority of all provinces and territories of Canada. In comparison, today, the ownership costs reach more than 120% of the median family income in some parts of the country.
It is necessary to mention that the outlook for affordability is not optimistic. The ownership costs are expected to grow significantly during 2019 and mortgage rates may lead to an almost 3% increase in the aggregate affordability measure for Canada (Royal Bank of Canada, 2018a). It means that homebuyer demand will be restrained due to affordability pressures. On the contrary, the Royal Bank of Canada (2018a) notes that a possible decrease in key markets and a rise in families’ income may improve the situation slightly.
Housing Affordability in Canadian Provinces
British Columbia presents one of the areas with the lowest housing affordability. The aggregate housing affordability measure for the Vancouver area, which is known for the highest prices on accommodation in Canada, is more than 85% (Royal Bank of Canada, 2018a). Arseneau and Dahms (2019) estimate that to afford a down payment for an apartment in a condominium, an average household needs more than 60 months of saving. It means that, currently, the accommodation prices have reached the highest point in history. The situation in Victoria is also crucial; average households require more than 65% of their incomes to afford housing (Royal Bank of Canada, 2018a).
The situation in Alberta is not as critical as it is in British Columbia. For instance, in Edmonton, an average family needs less than a 30% share of income to cover ownership costs (Royal Bank of Canada, 2018a). It means that, currently, there is no core housing need in the area. In Calgary, however, the aggregate affordability measure is almost 45%, which shows that unaffordability of accommodation remains a problematic issue (Royal Bank of Canada, 2018a). However, it is possible to note that in Alberta in general, ownership costs are relatively low and have changed insignificantly since the middle of the 1980s.
In this province, affordability cannot be considered a problematic issue. Since 1986, when the ownership costs were slightly higher than 30%, the situation in the market has not changed significantly (Royal Bank of Canada, 2018a). For example, currently, the aggregate affordability measure for Saskatoon is less than 35% and only around 30% in Regina. It means that the market in the area remains soft and there are no risks for the population regarding poor housing situation and high accommodation prices. The tendency in affordability measures shows that prices may decline slightly.
The ownership costs in Manitoba have decreased since the middle of the 1980s. Around 1990, they were at the highest point of 40%, while, currently, they are slightly less than 30% (Royal Bank of Canada, 2018a). It is possible to say that demand and supply in this area remain in balance, although the condominium segment has weakened. It means that housing affordability is not a problematic issue in Manitoba and the majority of the population is not in core housing need.
The situation in Ontario may be determined by the fact that Toronto is one of the most expensive cities in the country. Currently, household affordability in the area is the lowest since the middle of the 1980s. By the end of 2018, the ownership costs of median-priced accommodation constituted more than 75% of an average household income (Royal Bank of Canada, 2018a). During the past year, the resale activity in the area decreased by more than 15%. It means that purchasing a property in Toronto can be considered nearly impossible for the middle and low-class population. The situation in Ottawa is different, as the ownership costs have not reached 40% yet (Royal Bank of Canada, 2018a). It is possible to say, however, that many individuals living in Ontario are in core housing need.
The housing affordability measure in Quebec City remains relatively low and is less than 35% (Royal Bank of Canada, 2018a). The rate of ownership costs has fluctuated since the beginning of the 1990s but are, currently, at the same point as they were three decades ago. The affordability rate for accommodation in Montreal is around 45% compared to approximately 35% in the middle of the 1980s (Royal Bank of Canada, 2018a). It is necessary to mention that ownership costs in the area continue to rise rapidly, which means that the population of Montreal is in core housing need.
Saint John can be considered the most affordable markets of those mentioned above. The aggregate measure for the area is slightly more than 25% and shows no significant changes since 1985 (Royal Bank of Canada, 2018a). St. John’s has a similar tendency and is the second-lowest market in terms of accommodation prices. Another city in the area, Halifax, also has relatively low ownership costs that are slightly more than 30% (Royal Bank of Canada, 2018a). It means that buying n accommodation in the country can be the most beneficial in Atlantic Canada due to the highest housing affordability and no core housing need among the population.
Core Housing Need
To discuss the data on core housing needs in Canada, it is necessary to define this concept. Canada Mortgage and Housing Corporation (2018) reports that a family is considered in core housing need if the price of acceptable housing is 30 or more percent of its before-tax income. Acceptable housing is determined by several standards; for example, it should have an affordable price and be in an adequate condition without major repairs. In addition, it is vital that housing has enough space and bedrooms for the residents according to the National Occupancy Standard (NOS) (Canada Mortgage and Housing Corporation, 2018).
Statistical data show that, in Canada, the core housing need rate has remained stable during the past decade. In 2006, it constituted slightly more than 12,5% and stayed the same for 2016 with an insignificant drop by less than 0,5% in 2011 (Statistics Canada, 2017). However, the rates for various Canadian provinces and territories are different. For example, in Nunavut, the core housing need rate is, currently, more than 35% but, in 2011, it was almost 40% (Statistics Canada, 2017).
At the same time, the number of households in need is less only around 3,500. In New Brunswick and Quebec, the core housing need rate is lower than the overall percentage for Canada; it was around 10,5% in 2006 and decreased by 0,5% in 2016 (Statistics Canada, 2017). Ontario shows the highest number of households in need with more than 672,500 in 2006 and almost 750,000 in 2016. The lowest number of families in need is in Yukon (around 2,150) but the core housing need rate for this territory is about 15% (Statistics Canada, 2017).
As for metropolitan areas, the core housing need rate is the highest in Toronto and Vancouver. In 2016, it constituted around 20% and 17,5% in these cities correspondingly (Statistics Canada, 2017). Saguenay shows the lowest rate of 5%, which is significantly lower than the average percentage for Canada. In addition, it is necessary to mention that, of all households in core need, around 75% of housing is below affordability and 7,5% is neither affordable nor adequate for a living (Statistics Canada, 2017). These data show that the core housing need remains high and it is vital to address and eliminate this problem to increase the population’s quality of life.
|Area||Core housing need (%)|
Table 1: Core housing need in Canada.
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Drivers of Core Housing Need
Various factors affect core housing needs; socio-economic drivers are the primary ones. The first significant issue is trends in demography as the elderly, Aboriginal people, and immigrants represent a fast-growing group of the Canadian population. These components of the population affect the types and quantity of demanded housing. For example, at the beginning of the 1970s, the median age of Canadians was 26 years, while in 2013, it reached 40 (Canada Mortgage and Housing Corporation, 2014).
In 2011, the rate of housing needs among seniors reached more than 13,5%. It means that with age, individuals are at risk of lacking suitable accommodation. The Aboriginal population shows consistent growth, which results in crowding and housing in need of major repair. For example, around 10,5% of Aboriginal households experience crowding compared to about 5,5% of non-Aboriginal ones (Canada Mortgage and Housing Corporation, 2014).
In 2011, the core housing need of this group of population reached almost 20%, while the average rate for other Canadians was slightly more than 10% (Canada Mortgage and Housing Corporation, 2019b). Statistics show that many Aboriginal families live below the standards of adequacy, affordability, and suitability, which affects the quality of their lives.
As for immigrants, evidence shows that, usually, they form larger households than the native Canadian population (Canada Mortgage and Housing Corporation, 2014). In addition, they are likely to raise families due to their young age. It means that the core housing need for this group of the population may be high as accommodations should have enough rooms and be affordable at the same time.
According to the Canada Mortgage and Housing Corporation (2014), despite the high level of education, immigrants experience a higher unemployment rate and lower income compared to the native population. In 2010, the average household income of newcomers was around $42,700 compared to almost $61,700 for other Canadian families. These data reveal that with an increase in the immigrant population, core housing need rates may change significantly too.
The second driver of core housing needs is household income, which can determine housing affordability. This factor is linked to several issues, such as the employment of family members, their level and type of education, as well as changes in the economy in general. The costs of shelter may put larger numbers of households in core housing need as, in some cities and territories, prices may be significantly higher compared to other locations. As mentioned above, the size of households, such as in the case of Aboriginal people, can affect housing suitability as well. Finally, social and economic positions of families, in general, can influence core housing needs too because households may have to make large investments in renovation and repair.
Housing affordability remains an acute problem for many areas in Canada and is the most severe in British Columbia and Ontario. A family is considered in core housing need if it has to spend more than 30% of its before-tax income on accommodation. Currently, around 12,5% of the population of Canada is in core housing need. The outlook for the problem is not positive as the situation may worsen with time due to the aging of the population, an increase in immigrants, and the issues caused by the higher affordability of average-priced housing.
Arseneau, M. & Dahms, K. (2019). Interest rates raise the bar for home ownership in Q4 2018. Web.
Canada Mortgage and Housing Corporation. (2014). Canadian housing observer. Web.
Canada Mortgage and Housing Corporation. (2018). Housing observer 2018 – Digest 2016 and 2017. Web.
Canada Mortgage and Housing Corporation. (2019a). About affordable housing in Canada. Web.
Canada Mortgage and Housing Corporation. (2019b). Housing market information portal. Web.
Royal Bank of Canada. (2018a). Canadian housing affordability at worst level in nearly 30 years: RBC economics. Web.
Royal Bank of Canada. (2018b). Housing trends and affordability. Web.
Statistics Canada. (2017). Core housing need, 2016 census. Web.