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Affordability: Regina good, Vancouver bad.

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Marco sent in this link to a Globe and Mail story about a housing affordability study that looked at cities in six nations, comparing housing prices to incomes. They rate each city with a number of years it would take to pay off the average home with the average local income. Canada as a whole is not bad at all, with a median multiple of 3.2, just slightly above the traditional ‘affordable’ multiple of 3.0.

Regina has great affordability, with a median multiple of 2.0, while Vancouver doesnt fare so well on the affordability scale. Vancouver is rated the 13th least affordable city in this study, with a ‘severely unaffordable’ rating of 7.7

The survey was conducted by Demographia, a US consulting and research firm. The full PDF survey report is available here.

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skeptical optimist

It isn't just the weather that keeps Regina and Saskatoon affordable.People chose to live in areas for other reasons including the scenery, culture, proximity to friends and family and the job market.In Regina and Saskatoon, there's not much work for the highly educated unless you have a public service job. That's one of the reasons for the exodus of the young from that province. Larger cities have much more to offer them in terms of entertainment, educational, job opportunities and so on.You can buy a small farm on the prairies for the price of a Vancouver condo, but how many people want to?

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Snap Up Real Estate

It is pretty simple isn't it. Places people want to live are not very afforadable. Regina, Winnipeg, and Saskatoon are afforadable becuase it is minus 20 for 3 months of the year. Personally I would not want to live in Vancouver or Sydney AUS, but I can see the pull.Vancouver is a bit of an anomaly though. Seattle has much the same climate, but they are not on the unafforable list.

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the pope

Interesting to note that Canada is the lowest cost among those countries.Yeah, thats quite the disparity isn't it? We live in the most affordable nation rated, but Vancouver is the 13th least affordable market out of the 159 they looked at.

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Warren

Don't forget that random urban sprawl also SUCKS. Vancouver's city planning, whether through luck or skill, has turned out to be one of the best in North America. I travel all around the US, and the places I see with Interstate highways running all over the place and large ghettos in the downtown areas are terrible, and they are also the norm.Of course Vancouver is overvalued, but if Regina is always a 2.0, Vancouver will always be at least a 4.0, and well worth it.Interesting to note that Canada is the lowest cost among those countries.

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mohican

I was looking for data, a frequent pastime of mine, and I found that the City of Surrey, for example, has development cost charges of approximately $23,000 for an average residential lot. If I am a developer, I want to build the most expensive house I can on that lot to improve my profit margin on my product. Build the biggest house on the smallest lot and price it at the margin of affordability. There is no way a developer could profit by selling a $250,000 house if the development cost charges represent 10% of the total cost so they are forced to build a $500,000 house where the development cost charges represent 5% of the total cost.Add in the fact that up to 50% of a city can be completely off limits to development (ALR, parks, public land, transportation,… Read more »

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scoop

Apparently Demographia = Wendell Cox, a conservative libertarian who promotes urban sprawl and laissez-faire city planning.I am trying to engage with his arguments because it appears that he is taken seriously in urban planning circles. I can understand that building more compact cities raises the prices of land. But there should be more, smaller, housing units on every ha of land, so why would it raise the price of the average housing unit.

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the pope

Freako: The agenda is pretty clear looking over that PDF: its their answer to everything. I agree that geography can't help but have a big impact on planning options.I skimmed through the report looking for dates for the data – the report is for 2006 and they say they use the 'most recent' data available for the included cities, but mention that if they can't find recent data they 'extrapolate' older data.Mohican: I like that idea, if you could get the data it would be very interesting to see how those numbers would compare. How would you factor in population density?

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Freako

Demographia has an agenda, which is less restrictive land use regulations.IMHO, some of their arguments are potentially flawed. For example, in one report it argued that Calgary was more affordable because it has less restrictive zoning. However, I don't think that is straight cause and effect. It could well be that poor affordability AND restrictive zoning are a result of physical geography. In other words, the shortage of buildable land is what led to more zoning in Vancouver, not the other way around. Finally, it is obvious that the population pressure on Vancouver is a factor. We are "desirable" after all.Finally, I have never been able to reconcile Demographia's numbers. Their prices seem far lower than actual prices, as does income. Last time I checked, incomes seemed to be pulled from 2001 census.

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mohican

the pope said: "that land planning constraints is what has driven prices up"I have been thinking about this issue for a while – sort of a nagging thought in the back of my mind – that things like the Agricultural Land Reserve, Zoning Requirements, Transportation Issues, and other 'land use restrictions' are not as burdensome in many other cities. This could be a contributing factor in our excessively unaffordable housing situation.How could we measure this? This is a thought of mine – look at % of city that is restricted use – ie. ALR, Zoning, Parks, etc. and form a calcuation or ratio based on that to look at the affordability numbers and compare the two to see if there is some correlation.

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the pope

The gist of the survey report is that land planning constraints is what has driven prices up. Although I have no doubt that this is a factor, I'm not sure I buy the argument that its the primary factor.It also doesn't address the rent/buy gap in many markets currently 'correcting' in the US: If only the wealthy can buy a property it means that the number of potential buyers is narrowing. What does that do for long term appreciation?

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the pope

A quote from the survey report:Households will have to adjust to the inflated housing prices. Some households will reduce spending for other goods and services. As the effect of inflated housing markets ripple through economies, reductions are likely to occur in spending on what households consider to be less essential goods and services. This, in turn, is likely to lead to fewer jobs and a less robust economy.

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