January 28, 2008
Canadian Cities Lead World Housing Affordability
Each year the Demographia International Housing Affordability Survey compares housing affordability in the larger cities of Australia, Canada, Ireland, New Zealand, The United Kingdom, and The United States. Affordability is measured by the median multiple technique, which expresses the median house price as a multiple of the median household income. For example, in Regina the median household income is $63,200 while the median house price is $154,300, giving a median multiple of 2.6.
Of course this does not mean any household can pay for a house in 2.6 years, unless they were able to devote 100% of their income to repayments and avoid the additional cost of interest. Nevertheless the median multiple technique is a very concise and internationally comparable measure of housing affordability.
Several trends emerge from the two charts:
While these charts do not show a long time series, the large differences that are shown have emerged in the past two decades, and are unprecedented. From the post-war boom until the 1980’s, median multiples between 2-4 were the norm.
The Demographia data is a unique international comparison of how easy or difficult members of different city communities find it to afford a house, based on their income. After a comprehensive evaluation of possible explanations, the Demographia authors conclude that restrictions on land use through prescriptive town planning strategies are the only plausible explanation for the considerable differences in housing affordability that have arisen in the past several decades. The message for Canada is clear, our houses are the most affordable in the world, but there are dire consequences for jurisdictions that take affordability for granted.Data Source: Cox W and Paveltich H Available at Demographia International Housing Affordability Survey
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