Winnipeg, January 21 2013: Today the Frontier Centre released the 9th Annual Demographia Housing Affordability Survey. The survey covers 337 metropolitan housing markets in Canada, Australia, Ireland, New Zealand, The United Kingdom, and the United States, including 35 Canadian markets.
Housing markets are ranked by the ratio of median housing prices to median incomes (median multiple). A median multiple of under 3.0 is considered affordable. 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, seventeen were moderately unaffordable, four were seriously unaffordable, and six were 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. Eighteen 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 caused by the country’s poor economic conditions. The United States 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 declining affordability of 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 the above mentioned 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. By 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. While there are costs associated with urban sprawl, heavy handed growth management policies are corrosive to housing affordability.
About the authors:
Wendell Cox is a public policy consultant and principal of Demographia, an international public policy firm. He has also served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris (a national university) from 2002. He is vice-president of CODATU, a Lyon (France) based international research organization dedicated to improving transport in developing world urban areas. He is a contributing editor at newgeography.com and author of the Evolving Urban Form series, which provides development profiles of individual world urban areas.
Hugh Pavletich operates the archival website Performance Urban Planning and is the Managing Director of Pavletich Properties Ltd, a commercial property development and investment company.
Download a copy of the 9th Annual Demographia International Housing Affordability Survey HERE.
For more information, media (only) may contact:
Frontier Centre for Public Policy