Crunching the numbers on affordable housing
Plus: Data shows Canadian renters are getting squeezed
There’s a high-rise development being proposed for the west end of Hazeldean Road in Stittsville, and two frequent concerns we’ve been hearing from residents are that “these apartments won’t be affordable” and “my property value will be impacted”.
(An aside: It’s interesting that we never hear concerns about affordability for new single or townhome developments. Only apartments. 🤔 )
The builder says that based on current market conditions, they’re targeting rents at $1,900 for a one-bedroom apartment and $2,500 for a two-bedroom. I wanted to better understand who can afford those rents and to get a broader understanding of the rental market in Ottawa. So last week I spent a bit of time crunching the numbers on affordable housing.
Some numbers that jumped out at me:
Those prices are right on par with average rental rates in Ottawa as per Rentals.ca, but to afford them – ie, not spend more than 30% of your income on housing –you’d need a household income of $76,000 for the one-bedroom and $100,000 for the two-bedroom.
Average rent in Ottawa is up about 6.2% year-over-year. Our vacancy rate was 2.1% in 2023.
Ottawa’s median renter household income is $64,000 (based on the 2021 census), which means half of renting households in Ottawa can only afford a bachelor apartment if they’re staying inside that 30% guideline.
In Stittsville, the average single home sold for $936,276 in 2023, up nearly 60% from $586,479 in 2019. The average townhome sold for $606,163 in 2023, up about 53% from $395,846 in 2019.
Renting a typical single home in Stittsville costs $3,195/month, versus home ownership costs of $5,843/month. Renting a typical townhome in Stittsville costs $2,550/month versus ownership costs of $3,386.
This is the housing crisis in a nutshell. It’s getting harder and harder to find an affordable place to live. Many families are spending more than the recommended 30% of before-tax income on housing, and we’re seeing the effects in a number of ways, for example higher food bank usage and growing household debt.
So, to answer my original question: $1,900 for a one-bedroom and $2,500 for a two-bedroom is typical for market rents in Ottawa but at those rates they’re not affordable to low- or moderate-income households. On the other hand, they’re also far more affordable than owning a home in this community.
You can read my post here: What does “affordable housing” mean?
Related: This week RBC released a short analysis from economist Carrie Freestone titled “Canadian renters face higher hurdles to accumulating wealth than homeowners”. Some findings and data from the report that illustrate the impact of rising home prices and rental rates in Canada:
“Only about one-third of Canadian income earning households earn enough to purchase a single-detached home on their income alone. This is a stark difference from 2005 when half of Canadians earned enough to purchase a home on just their income.”
“More middle and upper-income earners could join the renting population if ownership affordability does not improve and more Canadians get priced out of the housing market.”
“Since 2010, homeowners’ real estate assets (excluding the value of mortgages) have grown four times faster than life insurance and pension savings.”
The report concludes: “Canadian renters are getting squeezed more than homeowners, making home ownership an even more distant dream. This threatens renters’ path to accumulating wealth—which could exacerbate inequality over the longer term.”
***
And finally, yesterday I read The Tenant Class, a short book released last year by Ottawa-based Ricardo Tranjan. He calls it an “alternative, critical perspective of the so-called housing crisis”, and most of it is focused on disassembling assumptions and narratives we have about the for-profit rental market.
It’s a quick read and while I don’t agree with everything, he does offer a useful perspective on the growing divide between renting and ownership in Canada. Most useful are the chapters that mythbust assumptions about renters and landlords.
Related: Book review by Carolyn Whitzman
Let’s get those apartments built! ✊
What's interesting is that even though the cost of home ownership is higher, the excerpt from Carrie Freestone's analysis above shows that home owners are still accumulating savings/wealth. If all things were equal between renter and home owner (salary and expenses), the opposite should be true. This makes one wonder what is missing from the equation (which is what your suggested reading talks about a little bit).
There is an article related to this in the Guardian which I thought was very interesting: https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-landlords-surprisingly-simple-solution-to-uk-housing-crisis?s=08
Maybe we need to start looking at the vacant unit tax as something more than a minor inconvenience of trying to remember your password once a year for the multiple-home owners.