Fixing Vancouver’s woeful wages won’t end the housing affordability crisis
The discussion about low incomes is overdue, but home prices remain the real issue
It’s usually Vancouver’s crazy house prices that get the headlines, but the other side of the affordability equation – incomes – have been getting some attention too, lately.
What with all the N-plated Ferraris and C$100 yoga pants, it’s easy to overlook the fact that incomes in Vancouver are among the lowest in Canada. Across the various municipalities that make up Metro Vancouver, the median household income was C$63,347 in 2011, while in the City of Vancouver itself, epicentre of one of the world’s greatest real estate price booms, it was a truly paltry C$56,113.
Longshot Vancouver mayoral candidate Meena Wong, of the left-leaning Coalition of Progressive Electors (COPE), helped get the discussion rolling with a pledge to introduce a “living wage” of C$15 an hour for employees of the city.
Then, on September 24, urban planner Andy Yan delivered a presentation to civics buffs that included a jaw-dropper of a stat: Vancouver ranked dead-last among Canada’s 10 biggest cities when it came to the median income of 25-55-year-olds with degrees. And at C$41,981, there was daylight between Vancouver and ninth-placed Montreal (C$47,276). Ottawa led the way with C$62,202, and the national figure was C$50,981.
It’s a devastating statistic, and the discussion about incomes is very worthwhile and long overdue.
But anyone who thinks that Vancouver’s housing affordability crisis can be successfully addressed by focussing on the income side of the equation is sorely deluded.
Just for fun, let’s tweak those figures. Let’s start by boosting Vancouver incomes by the 4.8 per cent required to see median family incomes match the national average. Vancouver’s hypothetical new affordability ratio is now 9.83. Still the second-worst in the world, by a big margin.
Let’s go further. If we boost incomes by the whopping 21 per cent required to bring those starving degree holders up to national parity, problem solved, right? The new ratio of 8.49 is now marginally better than San Francisco, San Jose and Sydney in Australia. But at 81st out of 85 ranked cities globally, Vancouver would remain the most unaffordable city in Canada.
It’s starting to get a bit silly now, but what happens if we suddenly make Vancouver’s degree holders the best-paid in the country, applying the required 48 per cent wage hike across the board. The price:income ratio is now 6.96. Vancouver is now merely the world’s 75th most affordable city out of 85. Hooray. It remains by far the least affordable city in Canada. Boo.
To put it into perspective, Toronto is currently the next-most unaffordable city in Canada with a ratio of 6.2. Among major Canadian cities (population 1 million plus), the median ratio is 4.5.
To simply match Toronto’s affordability, Vancouver requires a whopping 66% increase in incomes (and I have yet to hear a Torontonian brag about how affordable their housing is).
To draw level with Canadian major-city median affordability, incomes in Vancouver would have to go up by a staggering 129%.
All of this includes the optimistic assumption that such wage increases would have zero upward effect on prices.
There is nothing wrong with the new focus on Vancouver’s terrible wages, and in terms of improving affordability, I guess it’s better than nothing. But not much. It’s the equivalent of worrying about a leaky faucet on the Titanic. The problem of housing unaffordability sits squarely on the price side of the equation.
[*Update: This story has been updated to include a link to the latest Demographia study and to describe its scope]
The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email [email protected] or on Twitter, @ianjamesyoung70
