The Missing Middle Initiative, which is a research group housed at the University of Ottawa's Institute for the Environment, just published this detailed report on Southern Ontario's housing affordability crisis.
As we know, things are not good: In 2005, 21 of 26 single-family house markets in Southern Ontario could have been classified as either affordable or deeply affordable for middle-class families, and none were unattainable.
Today, none of these markets can be considered affordable or deeply affordable, and 11 of them are now unattainable. In every single one of these markets, buyers should expect to pay 25% or more of their pre-tax income on mortgage payments.
Below is one of their charts showing the price-to-income ratios for single-family houses in various markets since 2005. Outside of the Greater Toronto Area, the turning point toward worsening affordability was generally in 2016, and the peak was in 2022.
Here's some historical context. Canadians who had mortgages in the late 70s and early 80s often like to talk about how crippling rates were back then. But interestingly enough, monthly payments — relative to wages — are actually worse today than they were during this high-rate period (according to the report).
This is partly because home prices were a lot lower back then and so high rates didn't have the same impact to mortgage payments. Instead, the two worst periods of time for affordability (payments relative to wages) were during the late 80s housing boom and then during/after the recent pandemic.
Following the real estate crash of the early 90s, monthly payments relative to wages declined along with home prices. And they didn't return to the same levels seen during the preceding boom until 2022 — some thirty years later.
The same thing is happening right now. This reset is naturally improving affordability. But it really should be viewed as an opportunity to course correct before the next cycle begins. MMI's report does a good job explaining that housing is objectively less affordable today than it was for prior generations.
Charts from the Missing Middle Initiative; cover photo by Victor Ballesteros on Unsplash
Approximately 41% of the YTD population growth in Canada this year has been in Ontario. Here's a slide from a recent presentation by Zonda Urban:
So there's an argument to be made that demand is still outpacing new housing supply in most of our major markets:
Why then are new home sales continuing to slide? A reasonable answer would be that -- by design -- this new housing isn't attainable to most:
The result seems to be a long-term structural shift toward more rental housing:
This is an unfortunate distinction:
Of all the world’s housing crises, Hong Kong’s may be the most formidable. The city of 7.3 million leads the world in housing prices and inequality, with 125,100 millionaires and 1.6 million people living in poverty. Home prices have rocketed by 187% over the last decade. In May, the number of public housing applicants hit 245,000, with an average wait time of 6.1 years — the highest in over two decades. According to lawmaker Scott Leung, a shortage of 30,000 units in the next five years means that the public housing queue will soon stretch to 6.5 years.
So let's take a look at overall housing supply (source):
What this chart tells us is the following:
For the five-year period from 2017 to 2021, Hong Kong built about 173,900 housing units. That's somewhere around 34,780 per year.
Of these units, 60,700 were subsidized public rental housing units (~35%) and 25,500 were subsidized sale units (~15%). So overall, about half of Hong Kong's housing supply over the last five years was some form of subsidized housing. That said, the number of public rental housing units has been declining. It was about 70,800 units between 2007 and 2011.
Looking at private residential units during this same five-year period, about 35,200 of them (20% of total supply) can be classified as "small units." These are units with an area less than 40 square meters and, based on the above chart, they obviously represent a rapidly growing market segment.
Adding all of this up, we get to 70% of Hong Kong's housing supply being either (1) a subsidized unit or (2) a small unit under 40 square meters.
This is how Hong Kong builds, and it clearly isn't enough to meet demand.