VANCOUVER – Vancouver is the most unaffordable city in Canada for housing, and ranks 15th worst in the world, according to a study released last week.
The Demographia International Housing Affordability Survey found Vancouver had a housing affordability index of 6.6, measured by the median house price as a ratio of median income. Anything above 5.1 is considered “severely unaffordable,” the report said.
Los Angeles topped the world’s cities with an index of 11.2, followed by San Diego and Honolulu, at 10.8 and 10.6 respectively. The most expensive city outside North America was Sydney, Australia with an index of 8.5.
The survey looked at median house prices and incomes in 100 cities in the United Kingdom, Ireland, Australia, Canada, New Zealand and the United States.
This is the second year for the survey, which was developed to compare housing affordability around the world, the report’s co-author Hugh Pavletich said in a telephone interview from New Zealand.
“We felt there was a desperate need for an easily understood measure of housing affordability both within countries and across borders,” Pavletich said. “So it doesn’t matter what currencies we’re talking about, or even the house prices and the household incomes. The key thing is the multiple of household income it takes to buy a home.”
This multiple should not be greater than three, Pavletich said. He called Vancouver’s index of 6.6 “bloody absurd.”
“Historically back in the 1970s and 1980s within the property industry, it was always considered a rough rule of thumb that people should not have to spend any more than three times their household income to buy their homes,” he said.
Now as house prices get “out of hand,” this guideline has faded from public view, Pavletich said.
He and co-author Wendell Cox, both of whom are experts in urban issues, are trying to get affordability back into focus.
“Hopefully this survey will . . . explain in a very clear way to the public at large what affordability is and what we should be aiming for,” Pavletich said.
By doing the study, the authors were also able to compare affordable and unaffordable cities to see what was being done right, or wrong, Pavletich said.
In unaffordable cities, the key problem was the “strangulation of land supply” by local government, Pavletich said. Not allowing enough land to be developed was creating an artificial scarcity which is driving prices up, he said.
Three cities in Canada made the most affordable list with Winnipeg in third place worldwide with a house price to income ratio of 2.4, followed by Edmonton and Quebec City, tied at 14th with an index of 2.8.
The United States, with the world’s most unaffordable real estate, also had the most affordable, with indices of 2.2 in both Buffalo and Rochester, N.Y.
Pavletich hopes the survey will get people to question housing affordability and urge governments to actually set housing affordability targets.