Report Calling Sask. Unaffordable Got it All Wrong

Frontier Centre, Housing Affordability, Uncategorized, Worth A Look

The recently released International Housing Affordability Survey last month reported that Saskatchewan incomes are lagging behind housing costs, making both Regina and Saskatoon almost as unaffordable as Calgary. Obviously, based on the admitted use of limited criteria it's difficult to place much weight on the statements coming out of this work. Even only slightly more robust methodology would have produced results that clearly contradict the overstatements from the report.

For Saskatchewan, the survey only reported for the two largest cities. In the Demographia Report, affordability was measured by dividing median house price in a community by median household income, which created a median multiple.

Housing affordability is rated on a scale, with anything over 3.0 being unaffordable; the survey rated Saskatoon at 4.3, an increase over last year's 4.0; the median house price is 4.3 times the median household income. Regina was measured at 3.8 for the median multiplier, slightly better than Saskatoon.

However, when looking closely at the data used to calculate the median multiples, the housing prices used were from the third quarter of 2012; the median household income, though, is from 2006.

The median house price in Saskatoon is reported at 2012 levels of $283,200; while the median household income is reported at 2006 levels of $66,500. For Regina, the multiplier used a median house price of $266,000 and the 2006 household income of $70,900.

As Saskatchewan has experienced a strong and growing economy over the last seven years, it is fair to assume the median income will have increased, especially in Regina and Saskatoon, given employment strength and surging housing production, which has clearly softened housing price growth.

The reality is that Saskatchewan residents are receiving better wages and living more comfortably, while the economy remains strong and the province continues to prosper as jobs are created and the tax base expands along with the population.

Residents in Saskatchewan enjoy competitive and relatively low utility costs, one of the lowest unemployment rates in Canada and a high base personal exemption for provincial income tax. In 2013, the basic personal exemption or amount of income not subject to Saskatchewan income tax is $15,241. According to RBC's Housing Trends and Affordability Report from November 2012, there is little evidence of undue affordability-induced strain.

The RBC report states, "While properties continued to appreciate for the most part in the third quarter in the province, gains were comparatively more modest (condo prices even fell slightly) and any hit on affordability was easily offset by rising household income."

Increasing housing prices have been mitigated by an increase in supply.

We shouldn't be too offended when we realize that the data used for these misleading statements was also used for all Canadian cities that were cited in the report.

This suggests to me we really should ignore the results for the Canadian cities surveyed in this "international" report. However, it must be made clear that such reports while seemingly only misleading, have the potential to cause harm, interfere with market activity and result in unintended consequences. Economic developers and those most engaged in investment attraction and recruitment are now expected to respond to unsupported accusations.

Often hours and possibly weeks and weeks of intense efforts and expenditure of resources to advance the business case in Saskatchewan are at risk while we defend our strong case against statements that are not supported by facts.

Not too long ago, in fact in August 2008, a similarly flawed research report from Merrill Lynch suggested that home prices on the Prairies, and particularly in Regina and other Saskatchewan communities, were overvalued and would result in a rapid decline in both the value and the sales activity of homes in Saskatchewan.

History and facts clearly show the opposite has been the case and the strong fundamentals of the Saskatchewan economy offer a strong case for home ownership and investment in the province.

As the voice of the residential construction industry, the Canadian Home Builders' Association – Saskatchewan continues to be committed to a housing strategy that provides quality, affordability and choice in housing in all communities throughout Saskatchewan.

Alan Thomarat is the president and CEO of the Canadian Home Builders' Association – Saskatchewan and the Saskatoon & Region Home Builders Association. He also serves as a director on the national board of the Canadian Home Builders' Association in Ottawa. Alan thomarat CEO and President Canadian Home Builders' Association – Saskatchewan

Read Wendell Cox's comments in regards to this article below or view as PDF.

 February 12, 2013

To the Editor

Leader Post

Alan Thomarat ("Report calling Saskatchewan unaffordable got it all wrong," February 11) wrongly claims that the 9th Annual Demographia International Housing Affordability Survey uses 2006 income data for comparison to 2012 house price data.

In fact, Demographia used 2012 median household income estimates. These were developed from national statistical agency data for more than 300 metropolitan areas, including Saskatoon ($66,500) and Regina ($70,900). The Demographia survey provides reliable housing affordability ratings in the metropolitan areas of seven nations, including Saskatoon and Regina.

Perhaps the article confuses household income with family income. The 2006 census reported median family income at $65,800 in Saskatoon and $70,400 in Regina, similar to the Demographia 2012 estimates for median household income. The 2006 census, however, reported lower median household income, at $51,200 in Saskatoon and $55,600 in Regina (median household incomes are lower, because families exclude single person households and households of unrelated people, which routinely have lower incomes).

Housing affordability is a serious concern. In a recent lecture, Tiff Macklem, Senior Deputy Governor of the Bank of Canada indicated a 40 percent average house price increase relative to incomes over the last decade. Saskatoon and Regina have been among the metropolitan areas with inordinately rising prices.

The quality of life of future households and those aspiring to home ownership requires, in large measure, that housing be affordable.

Sincerely,

Wendell Cox

Co-author,

Demographia International Housing Affordability Survey