Attachment D: Proposed Service Fee Agreement

Affordability

An analysis of what median incomes can afford and the cost of owning or renting a house is vital to understanding where gaps or needs in the housing system may be for current and future residents of View Royal. Affordable and secure housing is a social determinant of health;³ however, housing across the region and much of British Columbia is increasingly unaffordable. This section analyzes affordability pressures in the housing market for median earners.

• Affordability is a challenge for both renters and owners; the number of both owner and renter households spending 30% or more of their income on housing increased between 2006 and 2016.

Table 1 shows affordability of ownership, based on estimated 2018 median incomes by household type and 2018 average annual sales prices by structure type. Median is used as a measure for household income because it helps to provide a more realistic picture by avoiding the effects of a skewed distribution or outliers. Average incomes can be affected by just a few significantly higher or lower household incomes; these can pull the average higher or lower than is a realistic representation in the community. This is compared to average sales prices because this is the most reliable data made available by the Victoria Real Estate Board.⁴ While BC Assessment provides median values, real estate board data reflects what is currently happening in terms of actual value in the market for homes, providing a more realistic picture of housing prices.

Table 1: Affordability for Owners, View Royal, 2018⁵

³ Source: Canadian Public Health Association website. 'What are the Social Determinants of Health?' ⁴ Medians accessed through the Real Estate Board are not 'real' medians – they are calculated based on grouped values, rather than the full set of individual values. ⁵ Incomes are adjusted to 2018 estimates using historical growth rates. For owners, shelter costs include, as applicable, mortgage payments (principal and interest), property taxes, condominium fees, insurance, and payments for electricity, fuel, water and other municipal services. For the purposes of this exercise mortgage payments are calculated using a 25-year amortization, with 2.54% interest, and a 10% down payment.

The analysis indicates that:

• Most households making the median income cannot afford the average single-detached home, which means that the single-detached form is unaffordable for more than half of households in the community.
• Lone-parents and one-person households with a median income are unable to afford shelter costs for all average-priced home types.
• Median-earning couples without children are able to afford smaller dwelling types (multi-plex and apartments) but may have challenges affording a row home and cannot afford a single-detached home.
• Median-earning couples with children are most likely to be able to afford all housing types. They can likely afford smaller row houses and 2-bedroom apartments, but likely cannot afford a single-detached home.
• Any households close to the threshold may find shelter costs become unaffordable when factoring in maintenance, repairs, and other unexpected costs.
• These patterns of unaffordability are consistent regardless of dwelling size. When broken out by size and structure type, households are still unable to afford the same dwelling types. The only difference is for median-earning couples with children, who can likely afford row houses with 2 bedrooms but likely cannot afford row houses with 3 or more bedrooms.

For median-earning households, renting in the primary market is generally more affordable than owning (Table 2). Couples with children and couples without children are all able to afford both a two-bedroom and the average rental across all rental unit sizes and types (i.e., one- to three-bedroom purpose-built rental apartments).

However, the rental pool in the primary market is very small, raising the question of availability and ability to access the desired type of rental. The secondary rental market may serve this, but is typically more expensive, and little data is available to determine affordability. Median-earning lone-parent households are able to afford an average rental but likely face challenges finding affordable units with enough bedrooms for their household’s needs (i.e., bedrooms for their child or children); however, these costs only factor in some shelter costs and there are likely additional monthly bills that make their housing less affordable. Moreover, median incomes are usually much lower compared to owner incomes, so these households likely face more substantial affordability challenges than is indicated in this table. Renting in the primary market is unaffordable for median-earning one-person households altogether.

Table 2: Affordability for Renters, View Royal, 2018⁶

⁶ Incomes are adjusted to 2018 using historical growth rates. For renters, shelter costs include, as applicable, rent and payments for electricity, fuel, water and other municipal services.