What does the term “affordable housing” really mean?

Researchers with the Housing Research Collaborative at University of British Columbia have created a tool to help cities figure out how much affordable housing stock they need.

Carolyn Whitzman is a social housing policy consultant and one of the researchers behind the Housing Assessment Resource Tools (HART), a project that creates standardized ways to figure out housing needs to help balance supply. In Phase 1 of the HART project, the team created a housing assessment tool that measures housing need by income categories and calculates maximum housing costs, usually rent, that meet affordable housing needs.

HART is funded by Impact Canada and the CMHC’s Housing Supply Challenge (you can read about the project here).

Thirty percent of gross income has long been considered the standard definition of affordable housing; it’s what the CMHC itself uses. In 1944, Canadian Advisory Committee on Reconstruction  and its ‘Curtis Commission’ report looked at what housing needs would be. Whitzman said at the time, affordable rent was calculated at about 20% of household income.  

 “There was some analysis of household budgets and it was felt 20% would be affordable,” Whitzman said said.    

That same report said about one-third of the housing created should be public housing in order to accommodate low-income families. Another one-third should be cheap rentals, and the other third would be ownership housing.  

By the 1970s, the definition of affordability crept up to 30% and it became an international standard. Whitzman said it’s calculation often used by the US and the UN.  

“Honestly, if you asked me what’s the scientific basis for 30%, I don’t think anyone could tell you,” Whitzman said. 

The HART house assessment tool is more defined and breaks down the housing need by income. Here are the categories:

1. Very low income: less than 20-30% of Area Median Income (AMI) or shelter allowance for a single person household on benefits, whichever is lower. In many Canadian communities, this equates to a housing cost of $375 per month. Approximately 6% of all Canadian households in this category are most at risk for homelessness due to inadequate economic and social support.

2. Low income: 20-49% AMI or one full-time minimum wage, whichever is lower. Considerable recent research on ‘rental wage’ shows that the private market is incapable of producing sufficient volume of homes in a range of sizes at a housing cost of $750 per month of less. This category includes about 16% of Canadian households.

3. Moderate income: 50-79% AMI, equivalent to starting salary for a professional job such as nurse or teacher. In most Canadian communities, market homeownership, even for a condominium apartment is not feasible for this group, approximately 20% of Canadian households.

4. Average Income: 80-119% of AMI, representing the ‘middle class’ and about 20% of total Canadian households. Although few of these households are in housing stress, average income households are currently locked out of the first-time homebuyer market in most Canadian cities.

5. Higher Income: 120% or more of median income, approximately 40% of Canadian households. The group with most housing wealth.

Whitzman said the tool has been used in the US, Melbourne, Australia, and is more or less the way Vancouver does its calculations. 

“We didn’t make it up out of nowhere,” Whitzman said. “It’s the basis of good practice.” 

The researchers also used Canadian census data to define housing need for people living in unaffordable, inadequate (in need of major repair), and unsuitable (an inappropriate size for the household) homes.

Furthermore, their research define housing need by using 13 priority populations, including survivors, especially women and children, fleeing domestic violence, single mothers, seniors over 65, young adults aged 18-25, Indigenous peoples, racialized groups, newcomers, including refugees, LGBTQ2S+, people with physical disabilities, people with intellectual disabilities, people with psychosocial disabilities (mental health and addiction issues), veterans, and homeless people. The report does acknowledge, however, that using census data means the needs of some people in those priority populations are lacking.

Whitzman said the income categories in this housing needs assessment tool are intuitive. The first is equivalent to the maximum shelter allowance for a single person, so across most provinces that’s $375/month or less, an amount Whitzman that is “out of touch” and hasn’t been raised since the 1990s. About 6% of households have annual income of less than $15,000/year. If you do the 30% calculation for housing cost, it works out to about $375. So, that 6% of Canadians who will be in housing need if they can’t find housing for $375/month. This is the population most at risk of homelessness.  

The next income level is what can you get for one person with one minimum wage job. In Canada, about 16% of households fall into this category. At the 30% of before-tax income calculation, people in this category can afford $750/month for rent. Whitzman said it’s in this category where many units have been lost and will continue to be lost if there isn’t a combination of rent control and scaling up non-profit housing.

“New market apartment buildings are not coming out anywhere close to this,” Whitzman said. 

These are the two income groups at greatest risk of becoming homeless.

The tool was already tested in Kelowna, BC. Whitzman said the research team considered that city’s leadership as progressive and were on board with the project.

The research team also wanted to test the tool on a smaller city; Kelowna has a population of about 140,000 people. Using the housing need assessment tool in that city, researchers found there is a very high need of affordable housing for the very low and low income households. Researchers noted the city has a high growth rate for seniors over the age of 85, as well as Indigenous households. With use of the tool, researchers recommended more ambitious social housing targets, and private market targets that include moderately priced rental units with two to four bedrooms. 

Whitzman said a big surprise in testing the tool in Kelowna was there was no net loss of affordable housing at $375 in that city based from the 2006 to 2016 census. 

“That is really unusual and we had to check it three times,” Whitzman said. “We happened in Kelowna was there was a huge rental boom. The vast majority of rental stock built was not affordable to people in housing need, but there was enough housing built in social and non-profit stock that they actually didn’t have a net loss.”

Whitzman and the UBC Housing Research Collaborative are now working on part two of their project: a land assessment tool that will help governments identify well-located land and buildings that can be used to meet housing need.

Whitzman said they’re working with 15 governments across Canada, including large municipalities such as Edmonton and Hamilton, but also smaller municipalities like Victoria County in Cape Breton. That part of the HART project starts this month and will wrap up in March 2023. The land assessment tool was already used in Kelowna along with the housing need assessment tool. 

 “Our hope is we will be able to come up with a formula that is easy enough and can take 2021 census data and have a lead table for all of Canada,” she said.   

Whitzman said the definition of affordability is simple.

“Generally, when we’re talking about these basic needs like education and health and housing, we need to have a definition of an adequate X is and we need to have a basic understanding of who doesn’t have that adequate X. And then we need to work toward the adequate X. It’s not rocket science.” 

“My hope is the federal government will come up with one definition of affordable housing that is based on ability to pay and not market value and that would be a big step forward, as far as I’m concerned.”

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