By Andres Ibarguen
New reports highlight demographic trends as housing prices increase
As recent reports by Missing Middle Initiative founding director Mike Moffatt and the Ontario Home Builders’ Association (OHBA) highlight, Southern Ontario is grappling with a housing affordability crisis that has reached near-record levels. This crisis is not only reshaping the housing market but also influencing demographic trends.
Using a household income of $115,000 to represent the middle class in Ontario, the report, entitled Southern Ontario’s Home Affordability Crisis Remains at Near-Record Levels, sought to compare different affordability metrics to understand how it had evolved over the last 20 years. One of the main findings that emerged from the report was that there were no affordable housing markets in Southern Ontario for middle-income households. In fact, 11 out of 26 markets analyzed were categorized as “completely unattainable.” This stands in contrast to data from 2005, when 21 out of 26 markets were deemed affordable, and none were “completely unattainable.”
When looking at the growth of inflation-adjusted house prices over the last 20 years, the reason for the drastic change in affordability becomes clear. During this time, house prices have more than doubled while real wages have only increased by 16%. This means that people now need to save significantly longer for a downpayment and spend more of their income to pay for their mortgage.
Looking deeper at affordability, the report reveals that the price-to-income ratio (a measure of affordability that compares pre-tax income to house prices) for major markets like the Greater Toronto Area (GTA), Hamilton, Kitchener, Waterloo, Guelph and Barrie exceeds 7:1. For comparison purposes, that ratio has more than doubled over the past 20 years, according to the Missing Middle Initiative.
The data highlighting unaffordability coincides with a demographic trend examined in another report by Mike Moffat, the Building Industry and Land Development Association (BILD) and OHBA. The report, Young Families are Leaving the GTA in Search of Family-Sized Homes, noted an annual net outflow of 80,000 people from the GTA compared to those who come to the GTA from other parts of Canada—the primary culprit being a lack of affordable homes.
The largest group leaving the GTA were those in their late 20s and children under five. Essentially, the study shows that young families are leaving the region for other parts of Canada in search of affordable, ground-oriented homes. In an area where the average single-family home exceeds $1 million, it’s no wonder people looking for more space are leaving. However, the effect this has on the areas they go to—for example, other cities in Southern Ontario—is increased demand and, therefore, prices in those urban areas. This translates to decreased affordability in those regions, a snowball effect that pushes people further from the GTA.
You can read the full reports at ohba.ca.
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