Thank you for taking time out of your busy day to view my blog. Today’s article will focus on a Perspectives paper prepared by The Institute on Municipal Finance and Governance (IMFG) is an academic research hub and non-partisan think tank based in the Munk School of Global Affairs at the University of Toronto. Access the original paper here. The following two bullet points are the most important points from an article I found:
- Why we should care about affordable housing:
- Access to accessible and affordable housing is one of the key determinants of health
- Providing it will reduce the burden on social services and will make the working class more productive
- Ontario is the only province in Canada where the Municipality provides social housing
- We can all appreciate the fact that all around us, the ability of individuals to access affordable housing has decreased, but affordable housing stock has not increased. Leaving more and more citizens at risk.
- Given the budget constraints, there is little ability to increase affordable housing stock (e.g. Toronto Community Housing is only replacing rental units that once existed and is not increasing the number of units even though the waiting list keeps increasing.
- Given the gap in the pricing of real estate and rents, someone must fill in that gap between what people need (i.e. safe and affordable shelter) and what the market offer . There is no “free lunch”
Before we dive too deep, lets make sure we are on the same page in terms of basic definitions.
- Affordable rent: <30% of before tax income or 80% of market rate (CMHC).
- Rent-geared-to-income: rent is determined by the tenant’s income capped at 30% of before tax income.
Why there is a problem:
- Record low interest rates, lots of construction, and the perception that RE is the golden ticket to everlasting riches has increased the demand for housing, but has resulted in less affordable housing (hence our current predicament).
- has housing has become more attractive, prices have increased and debt at % of disposable income has increased with it.
Why has affordability eroded? Simple:
- Incomes have stagnated. Adjusting for inflation, the average income of the bottom 20% of Ontarian hasn’t moved since 1990 when it was $15,000. To put that in perspective, the average minimum work wage earner isn’t doing much better:
- $14/hr x 40 hrs/wk *52 weeks/year = $29,120 (Gross), and
- taking home $24,375 after EI, CPP, Federal and provincial taxes.
- Shelter cost would roughly be an absolute minimum of $12,000. With the average in 2013 being $1,100/month.
- That doesn’t leave a lot of money to eat, commute, buy clothes, etc.
- Simply put: “the long-term trend is troubling: between 1990 and 2008, rents for one- and two bedroom private rental units in Ontario grew twice as quickly as the median income of renters.
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