Affordable housing
The affordable housing issue is a crucial topic of conversation among local economic developers in Canada. A tight housing market affects not only families but also labour markets because there are no places to live, and growing businesses struggle to attract the necessary workforce[i]. In Southeast New Brunswick, the problem is worsening due to the historic increase in population growth the region is seeing (caused by high interprovincial migration and immigration).
Canada considers housing “affordable” if it costs less than 30% of a household’s income per year (before taxes)[ii]. An affordable residence for a median family in Southeast New Brunswick (Albert and Westmorland counties) would cost less than $22,236.60 per year, which is 30% of the median household income (before taxes) in the region ($74,122). Therefore, any median family paying more than $1,853.05 a month for a mortgage or for renting and apartment is not living in affordable housing. Given that the average rent for a two-bedroom apartment[2] in Moncton in Oct. 22 was $1,302 (CMHC, 2022)[iii], it appears that for median and above median families in the region could still find affordable housing.
But what about a household with a yearly income of less than $30,000 (before taxes)?
Which represents almost 10% of households in the region (2021 Census profile)[iv]. For them, housing opportunities should cost less than $9,000 yearly (less than $750 a month). Well, this is much more challenging, given the average prices of the actual market. Therefore, if one assumes that free market forces and perfect competition should govern housing provision in an economy, every family in these circumstances would only find it possible to find housing here if they already owned a house or an apartment.
If we look at the median individual wages of the main economic sectors by employment in the Moncton CMA in 2020: Wholesale ($49,630) and retail trade ($22,870), healthcare and social assistance ($33,450), and Finance, insurance (49,960), real estate, rental and leasing ($34,890), a family of two adults working on the retail trade sector would find it very difficult to find affordable housing in the region with the current rent prices.
Before looking into possible solutions to this problem, let’s identify the main causes of this affordability crisis.
The term “housing crisis” appeared in North America around 1945 when second war soldiers returned to a tight housing market in the U.S. In Canada, Maclean’s magazine brought the issue to attention in 1967.[v]. According to Rozworski (2019)[vi], there are at least three leading causes of the affordability crisis:
- The social housing austerity promoted by the Federal Government (since 1993)
- The limited supply of land for residential development
- The shift to a monetary policy of low-interest rates.
These three causes are considered a structural shift and, in turn, created the perfect conditions for a long housing boom. Initially, buying a house under low-interest rate conditions was relatively cheap. After a stable, growing economy and with limitations on land developments, prices increased. Houses became a major investment asset, bringing average families in need of housing to the market, as well as wealthy investors, increasing the demand for a relatively limited supply of available land for dwellings. This has created the current conditions for housing inequality and related social issues that exist today.[vii].
So, if these are the causes, what possible solutions could there be?
In broad terms, there are three big approaches to housing affordability: the economic perspective, the planning perspective, and the social perspective.
The economic outlook implements tools to affect the market forces and increase the provision of housing for low-income families that otherwise could not find a place to live. Canada’s primary solution, for example, is delivering government subsidies to builders, co-ops, or non-for-profits to build multi-unit residences that could be rented or sold at lower than market prices; or providing low-income families with additional funds to be able to pay their rent. The significant limitation to this approach is that it depends on public funding and requires overcoming substantial red tape for its implementation.
The planning perspective aims to solve the issue by increasing the land available for new residential units, either by integrating rural land into urban land more quickly or by allowing denser rezoning to build more housing units in a developed plot of land for detached or semi-detached residences. Some examples of this approach are initiatives like “Yes in my Back Yard”[viii], and the missing middle[ix]. These approaches may face the community’s pushback for fears of affecting the value of neighbouring houses. It also requires long processes to obtain the necessary permits. Still, it could also help to solve climate change issues[x].
The social perspective makes the government responsible for building and managing residential buildings that can accommodate many families who rent or lease the space at an affordable price. This approach proved successful for Singapore[xi], where the Housing Development Board (the public housing authority in the country) plans, builds, manages, rents, and maintains the buildings. The intent is to provide housing ownership for all Singaporeans and promote financial gains for the Board and all its residents. Canada left this strategy behind in 1993.
So how are we going to solve this problem in Southeast New Brunswick?
Are we going to continue implementing the economic approach, like the “Affordable Rental Housing Program”, or are we open to other solutions or ideas?
It would be good to open community dialogues to build integrative solutions in each municipality, as the answer is not so simple.
Maria Fernandez Ph.D.
Economic Analyst at 3+
End Notes:
[1] The Housing Price Index (HPI) measures the price changes of residential housing as a percentage3 change from some specific star date at which the HPI was 100.
[2] The average household size in Southern New-Brunswick is 2.4 people, so the assumption is that they can live comfortably in a two-bedroom dwelling.
[i] City hall holds the key to solving the housing crisis in Canadian cities | Policy Commons
[ii] https://www.cmhc-schl.gc.ca/en/professionals/industry-innovation-and-leadership/industry-expertise/affordable-housing/about-affordable-housing/affordable-housing-in-canada
[iii] rmr-canada-2022-en.xlsx (live.com)
[iv] Profile table, Census Profile, 2021 Census of Population – Albert, County (CT) [Census division], New Brunswick;Westmorland, County (CT) [Census division], New Brunswick (statcan.gc.ca)
[v] Housing crisis? What crisis? Canada has struggled to house people for decades | Financial Post
[vi] The roots of our housing crisis: Austerity, debt and extreme speculation : Policy Note
[vii] Canada’s housing crisis will not be solved by building more of the same (theconversation.com)
[viii] YIMBYISM AND THE HOUSING CRISIS IN CANADA AND THE UNITED STATES: A Critical Reflection – Tretter – 2022 – International Journal of Urban and Regional Research – Wiley Online Library
[ix] How the ‘missing middle’ could solve problems in Canada’s biggest housing markets | Globalnews.ca
[x] Higher-density development solution for housing affordability and climate change, new report | Canadian Centre for Policy Alternatives
[xi] Behind the Design of Singapore’s Low-Cost Housing – Bloomberg