Let’s Forget About “Affordable” Housing

In Vancouver there has been endless talk and spin about “affordable housing”.  It is an important subject, but one that has no accepted guidelines for the debate. For example, many groups and institutions say that anything that costs more than 30% of gross income is not affordable, while Councilor Jang and others have proclaimed, unhelpfully, that “affordable is whatever you can afford.”

Mayor Robertson and his development cronies say that any rental or any condo of whatever price is affordable because it is more affordable than buying a house in Vancouver. He and they are deliberately confusing the terms “affordable” and “cheaper”.  Just because a $600,000 condo is cheaper than a house at $1.2million, it doesn’t make the condo any more affordable to the average Vancouver wage earner making $50,000 a year.

Obviously the term “affordable housing” has been spun out of any meaning, and I say it should be abandoned altogether.

I prefer the term “lower-income housing” because that is what we are actually talking about.  However, I recognise that will quickly be spun into a pejorative.

So how about “median-income housing”. This would have a very specific meaning as we know the median income in every neighbourhood — and it is a lot lower than would allow for the purchase or rental of most condo and “market rental” properties on offer today.  Thus it would equate to affordable for at least half of the population.

Just a suggestion.

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2 Responses to Let’s Forget About “Affordable” Housing

  1. First of all, Jak, you narrowly missed the exact Jang quote, which was: “Affordable housing is something somebody can afford.” (Original audio source for verification here: https://www.youtube.com/watch?v=VSVymChuoVw)

    So affordability is not just what YOU can afford, but what just any SOMEBODY can afford, like your rich uncle or that multibillionaire who just bought the house next door and demo’ed the beautifully-cared-for older home on it. Yes, affordability is what THAT OTHER PERSON can afford. With this Council, it’s not after all, or ever, about YOU, but rather the guys with pots of money who want to make a lot more of it…from YOU.

    I’ve always wanted a Porsche and I’ve long known that some SOMEBODY could afford one, because I see them on the street. So now I know they are affordable to me. If only CMHC would underwrite my car loan for merely three times my current income just like they underwrite mortgages for 13 times the income of buyers of “affordable” housing…

    As a taxpayer, I am getting very worried right now!

    The truth on affordability is this. Building a low to mid-rise townhouse or apartment block should cost about $150 per salable square foot, with builder’s profit included. In comparison, a high-rise concrete and glass tower has a built cost of a bit over $200. With properly-zoned land costs of $75 per built square foot–as existed before Vision took over the city–and thus no multi-year land rezoning cost, and add in some (very low) holding costs and architectural fees, and you have $250 per square foot of total real costs (and profit) in a new, decent and well-built Vancouver home. So a 500 square foot one bedroom ought not to cost more than $125,000, or with 10% down and a 25 year mortgage at 3% (close to 2% is easy to get today), it’s $533 a month. A 3BR townhouse of 1,000 square feet would be $250,000, or $1,066 a month. Best of all, both of these homes should rent for the same amount, or in time, even less.

    Everything that happens between these MAYBE AFFORDABLE costs for people with a decent and stable job, not all of us by any means, and what is currently being put of offer AND blessed as “affordable” by this Vancouver Council is graft, inefficiency, and monopoly profit. Given that the going rate for a condo in a tower, without a mountain view is over $800 per foot, you can see that there is LOTS of room for any developer to skim off lots of money to buy any politician of choice, and still maintain a 1%, or .01%, lifestyle.

    But the game is now over. The Ponzi scheme of Vancovuer’s significant overbuilding over the past 10-15 years is about to burst, as property values start to plummet across Canada, and actually be reported as doing so: http://www.thestar.com/business/2014/12/12/canadian_house_prices_down_03_per_cent_in_november.html. Just as happened in the US in 2007 (and has happened everywhere throughout history), smaller markets with less liquidity suffer first and then the commodity sell-off spreads like wildfire. Vancouver is set to lose at least $50 billion in residential real estate value over the next couple years. It could and should amount to over $100 billion in losses to return to the long-term trended value mean for this city. And this is just Vancouver, as the Lower Mainland will suffer as well.

    That’s going to hurt, and hurt badly. And the ones hurt most will be the little guys, who bought in recently….meaning anytime in the last decade. More than just the seawall will be under water. Vancouver will see more people walking away from their mortgages than any city in Canada ever. Recourse loans? Sure. Just try to get blood from a stone…if you can find one.

    And what SOMEBODY will pay for this mess? Will there be recourse against the developers and city councillors who set up this Ponzi scheme?

  2. artitectus says:

    There is an interesting discussion going on in London right now about grades of affordable housing … It might be useful to adopt some of the codified levels of affordability:

    “London housing: Conservatism and neighbourhood mix in north Kensington”

    http://gu.com/p/4e2t4

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