“Vancouver – Is homeownership becoming a far-fetched dream?”
That is the question at the heading of a new housing affordability report by RBC Economics Research. And the answer is “yes.” The report claims that to purchase a bungalow, the average Vancouver household has to dedicate 92.5% of its income to housing costs. The second most unaffordable Canadian city is Toronto, where the average household would have to dedicate 51.9%. CMHC defines “affordable” as having to pay no more than 30% of household income on housing.
For a ‘standard two-storey’ the average Vancouver household would have to dedicate 95.5% of their income. Again Toronto is second worse, at 61.4%. Even a ‘standard condo’ in Vancouver is severely unaffordable at 47.1%, also the worst rate in the country.
This is of course not the first report showing how housing prices are out of reach for Vancouver residents. Demographia’s annual housing affordability survey has ranked Vancouver in the bottom three out of about 300 global cities for several years in a row. According to Demographia, the average housing price has been 9 to 10 times the average family income. A report by BMO in June of 2011 calculated that ratio at an even higher 11. For our review of these reports, see here.
Realter Bob Rennie has been trying to argue that these numbers are skewed by high-end sales. But this is simply not the case, because Demographia uses medians (which exclude both low and high end sales for the analysis), and RBC uses ‘standard’ dwelling, to distinguish from the ‘average’.
These indicators of Vancouver’s housing unaffordability point to a severe social crisis in Vancouver, amidst a larger global financial crisis. Prices are not being driven up by rising domestic incomes; therefore, Vancouver residents must either go into debt, or else be displaced from their city. Nor are these prices reflective of the ‘use-value’ of the housing – the price of ownership is rising faster than the rental price.
These prices are a reflection of investment and speculation, as Vancouver real estate is seen to be a relatively safe ‘sink’ for accumulated global capital. The RBC report sites “anecdotal” evidence that some “foreign buyers continue to propel higher-end property values, and part of the momentum created is cascading down to other market segments.” But the majority of real estate speculation in Vancouver is by domestic buyers. Furthermore, capital accumulation generated by Canada-Asia networks is something that Canadian capitalists and the BC government have been aggressively promoting for decades. These networks are therefore produced domestically in order to exploit others. This accumulated capital, generated by global capitalist networks, extract profit from various sources, including resource extraction in Canada and elsewhere, as well as oppressed labour in Asia. As a result, working people on all continents face shrinking wages and higher costs of living.
Chris
August 24, 2011 at 9:39 am
Off the back of the RBC report I wrote this article on the city’s obsession with house prices.
http://musingsofanurbanist.blogspot.com/2011/08/real-estate-in-vancouver-local.html
@MusingUrbanist
Beth
August 25, 2011 at 9:41 am
Thanks for this astute and concise analysis of the varying factors at play here. As this subject increasingly becomes a topic of media attention, I wonder when calls to actively redress the issue will become vocal. How will we demand change? Do we call our provincial government to account for pimping our housing stock to overseas speculators? Do we take our City politicians and planners to task for allowing a rampant tear-down culture in our city? Do we demand that the federal government change their inequitable “investor-class’ immigration policy? When will the calls for change begin?
Richard
August 25, 2011 at 12:27 pm
I am rather surprised that a supposedly progressive blog would quote “research” by Demographia. Demographia is the latest vehicle of Wendell Cox, a pro-sprawl, anti-transit, anti-urban activist who supports “free market” solutions. As such, they are not looking for the truth, they only look for ways of manipulating and presenting data to support their positions. In particular, they are using this “research” to support their claim that there should be no restrictions on development meaning in this region, there should be no green zone or Agricultural Land Reserve. I suspect you really don’t want endless sprawl covering all the farm land out in the valley.
One major flaw in their analysis is that they only look at housing prices, not overall affordability. If you factor in the cost of having a family having to own a lot of cars and drive everywhere, all of a sudden, sprawl doesn’t look like such a good deal.
I don’t really feel like looking at their research. Last time I did, I think they did not include many cities that were more expensive than Vancouver in their study. Might want to check that out.