Housing woes hitting home
April 24, 2008During the past winter, Calgary’s finest armchair real estate pundits were quick to spot the housing market’s volatility and when prices plunged, pushed their friends to sell, sell, sell.
Then, at the first glimmerings of a warming trend, they loudly urged their relatives to buy, buy, buy.
As market gyrations continued, these self-same experts were uncertain if they should tell their clientele pals to buy on rumour or sell on the news, do the opposite, do both, or do neither, based on which way the wind was blowing.
Last week, these sharp, sophisticated analysts huddled in loungers and proclaimed Equal Housing Opportunity Day to bring the city’s attention to the fluctuation in prices. Not an unmitigated success.
The Calgary Chamber of Commerce has no need to erect a weather vane to accurately assess Calgary’s housing market. Last winter, its policy think tank researched housing prices, trends, and indicators.
Next Wednesday, the Chamber will unveil a major housing affordability report that proves housing costs have increased at rates higher than incomes, impacting the quality of life Calgarians enjoy.
The analysis shows that today, Calgary rates below Toronto, Ottawa and Halifax. Yet four years ago, Calgarians had the highest relative discretionary income in the country.
According to Canada Mortgage and Housing, housing is affordable if a household does not spend more than 30% of pre-tax dollars on shelter costs — mortgage, rent, condo fees, property taxes, and heating.
In 2007, Calgarians spent about 44% on housing alone, up from 32% in 2005.
The Chamber thinks a better measure of affordability is the market basket measure, as it gauges the quality of life. It includes how much it costs a household for food, shelter and clothing, then estimates how many loonies are left for movies, ski trips, lattes and holidays.
Today Calgarians have less money for fun stuff.
The business community is deeply worried about what this is doing to Calgary’s competitive advantage. The city’s deteriorating housing affordability is another challenge for companies already struggling with the labour shortage. It’s harder and more expensive to attract and retain employees.
As housing prices increase, so do rents and, as rental vacancies shrink, our reputation as an affordable place to live and work is undermined. Solutions cannot wait.
The city’s housing market has historically functioned well. Prices were reasonable (10% below national average), housing was plentiful, and most places offered sufficient amenities. Then the energy boom hit and prices went skyward. Calgary has surpassed Toronto to become the second most expensive market in Canada.
The Chamber has made these recommendations to the Alberta Affordable Housing Task Force:
- Strategic leadership: Create an Alberta Commission and a 10-year plan for affordable housing supply.
- Land supply: Develop policies to dedicate surplus or underutilized provincial properties.
- Development incentives: Enable municipalities to streamline regulatory processes, such as fast-tracking permits, waiving permit fees and elimination of development fee levies for affordable housing.
- Secondary suites: Permit these in existing neighbourhoods and provide homeowner incentives to meet appropriate building and safety standards.
The Chamber is confident government legislators will be pleased with its report to improve housing affordability. It may save them from introducing a new bill to enforce housing price equity.
“It’s fantastic that once again corporate Calgary has found a solution that works for all Calgarians,” is the reaction we expect from city hall.
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I eagerly await the Chamber’s major housing affordability report next week. I am always looking for research to inform myself and others on the important issues facing our city.
I have been thinking a lot about absolute and relative measurements recently and am struck by how the Irish government has found to blend them in their definition of poverty.
The official Government approved poverty measure used in Ireland is consistent poverty, developed independently by the Economic and Social Research Institute (ESRI). This measure identifies the proportion of people, from those with an income below a certain threshold (less than 60% of median income), who are deprived of two or more goods or services considered essential for a basic standard of living from the following 11-item index:
1. Two pairs of strong shoes
2. A warm waterproof overcoat
3. Buy new not second-hand clothes
4. Eat meals with meat, chicken, fish (or vegetarian equivalent) every second day
5. Have a roast joint or its equivalent once a week
6. Had to go without heating during the last year through lack of money
7. Keep the home adequately warm
8. Buy presents for family or friends at least once a year
9. Replace any worn out furniture
10. Have family or friends for a drink or meal once a month
11. Have a morning, afternoon or evening out in the last fortnight, for entertainment
I think this type of measurment might allow us more room for agreement on the definition of poverty in Calgary and might lead to a way of discussing issues from a less partisan position.
Interesting report, thanks for sharing with us. That`s undoubtedly true that if an area doesn`t have stable economy and the figures of the unemployment are negative the real estate market is in recession. As working for a Vancouver real estate company I would say that this is not a unique phenomenon throughout Canada but we shouldn`t worry too much as the slowdown has propsperous effects as well.
Price of Oil at $120 a barrel!
The Straw that killed Suburbia!
The City of Calgary Increases Taxes 5.4 %!
Will the high price of oil finally force sanity on the Citizens, the Planning Department, City Council, and the Development Industry of the City of Calgary? The relentless unbridled expansion of our suburbs is a result of many unsustainable, short-sighted planning policy decisions fuelled by cheap oil. Who now can afford the lifestyle of the 2000 square foot double garage home miles away from work, shopping or schools?
The answer is fewer people, with many more demanding affordable housing closer to public transportation. Unfortunately for Calgary, we have too little of this kind of housing. The current real estate downturn might just give us our first clue. Of the current 6,860 single family listings, 50% are 13 years old or newer and 47% of all listings are in far away suburban areas. Shockingly, over 67% of all single-family listings are priced over the median selling price of $420,000. At 100% financing, a $420,000 house purchase requires a qualifying income of $100,000.We have too much, too expensive, and too big houses in too far away places.
To the credit of city planners, builders and developers, they have been trying for years to create better and more affordable housing options only to be blocked by short-sighted policy decisions pandering to the NIMBYS ( Not in my Back Yard ). The new land use bylaw does very little to address this issue, all the newer, more innovative, higher density housing is allowed on the outskirts of the city, exactly the least preferable place for infrastructure cost efficiencies.
Developers and builders can only build what they are allowed to do or not at all if it is unprofitable. Yet people need housing, and this city needs workers and future taxpayers to support long term growth, otherwise we are doomed to become the Middle East of Canada, with temporary jobs, housing and lives.
If Citizens continue to block basement suites, granny suites, townhouses and low rise units in their areas, consider the unintended consequences; higher property taxes for more and longer roads, sewers, buses, police cars and garbage trucks. We may have reached a tolerance threshold for property tax increases that will limit our capacity to fund much more suburban growth.