There seems to be one of these “affordability reports” coming out every other week – to the extent that we at REW.ca no longer publish individual articles on them. We’re not trying to keep the information from our readers – just sparing them the highly flawed and repetitive drone of how Vancouver is the most unaffordable city in Canada and that average homes are utterly out of reach for average households.
This week it’s the Desjardins Affordability Index, which puts Vancouver’s affordability index at 69.6 points, much lower than anywhere else in Canada. In Desjardins’ world, this means that Vancouver’s average household income is 30.4 per cent lower than necessary to qualify for a mortgage on the “average house price of $850,000”. The index assumes a 10 per cent down payment, 25 years amortization and some complicated calculation of interest rates combining current one-year and five-year posted rates.
I won’t go into the massive flaws of citing average house prices (more on that from real estate investment guru Don Campbell) except to say that in Vancouver, such calculations skew real-world prices upwards because of the extent of high-end luxury home transactions. The benchmark price is a much more reliable figure (representing what you can actually expect to pay for a certain house in a certain neighbourhood) and currently stands at $660,700 for a typical home in Vancouver, far from the "average" of $850,000. Nor will I harp on again about the point that very few people who are spending $850,000 on a property are first-time buyers with only 10 per cent to put down (more on that here), so that is also unrealistic. Most readers will already know that we at REW.ca believe that our region is much more affordable than these reports would have us believe and the general public perceives (and more on that here).
All of the above is not to say that Vancouver isn’t relatively expensive compared with other Canadian cities – of course it is, for many reasons that I also won’t go into today. And it is not to say that there aren’t many individuals and families out there who struggle to get a foot on the property ladder. So there is always a need for innovative solutions to be adopted in finding ways to push up densities and increase affordable housing supply.
Thank goodness, then, that at least one organization is putting out information that actually tries to spark intelligent debate about finding such solutions. Earlier this week, BC Housing published International Examples of Affordable Homeownership. It’s the best, perhaps only, report I’ve seen in the past year that really tries to encourage our city and province to examine innovative solutions that could apply to our market.
The report looks at what countries around the world are doing to improve affordabiity, the tools that are used to make the systems work and, crucially, how they might be adapted to Canadian housing markets. It’s thoughtful, well-researched and insightful.
Here are some highlights from just three of the many fascinating case studies:
- Rent-to-Buy (UK): “Under Rent to Buy, homes are rented around 20 per cent less than the typical market cost of an equivalent home. This allows people to save money while renting … These homes are sometimes sold but sitting tenants have the right of first refusal to buy on a shared ownership basis."
- Cornerstone Partnership (US): “The Cornerstone Partnership is a peer network for homeownership programs that preserve long-term affordability and community stability, helping more people buy homes, maintain those homes and keep them affordable in the future … Founding partners include Habitat for Humanity, Fannie Mae, Freddie Mac and the National Association of Local Housing Finance Agencies.”
- Champlain Housing Trust (Vermont, US): “Through a combination of homebuyer education, community land trusts, loan funds and shared equity products, CHT is one of the top-performing innovative affordable homeownership organizations in the US. In 2008, CHT was awarded a World Habitat Award for its work in providing sustainable and affordable homeownership programs for Vermont households.”
Here in Vancouver, we can just hope that all levels of government take note of this kind of information and start trying to adopt some of these innovative practices.
In the meantime, let’s all keep the findings of affordability reports in perspective and keep the dialogue going about solutions for our city. We at REW.ca pledge to do this, and you can find some great examples from some of our city’s thought leaders in Related Stories below.