Is housing unaffordability in Vancouver caused by scarcity or by low wages?
Higher wages are good, but can't fix housing scarcity
Why is housing in Metro Vancouver so unaffordable?
We have people who want to live and work here, and other people who want to build housing for them. The problem is, at the municipal level we regulate new housing like it's a nuclear power plant, and we tax it like it's a gold mine.
So then housing is super-scarce, and prices and rents have to rise to unbearable levels to force people to give up and move away, or crowd into existing housing, or worst of all, end up homeless.
Because housing in Vancouver is so scarce and expensive, real wages are low: after paying for rent or a mortgage, you don’t have much left over.
And then because it’s hard to persuade people to work for low wages, we end up with labour shortages, e.g. in healthcare.
If housing costs are too high and pay is too low, that suggests that we can narrow the gap by lowering the cost of housing, raising pay, or both. So shouldn’t we focus on increasing pay?
Rising productivity and higher wages are definitely good, and something we should be aiming for. Unfortunately, as long as housing remains scarce, broad wage increases will immediately get absorbed by higher rents. Wage increases make high housing costs more bearable - but they have to be unbearable to force people to leave.
Conversely, if apartment buildings built in Metro Vancouver in the last five years were allowed to be somewhat taller, total rent paid annually would be about half a billion lower.
$100,000/year in Vancouver and Toronto
Jen Gerson, who lives in Calgary:
When I speak to my friends who are trying to raise families in cities like Vancouver and Toronto, I am ceaselessly baffled by the kinds of financial and material compromises they make every day. I want to scream at them: “Hey, guys, you can live in a decent house with a nice yard near a charming shopping area for a fraction of the price of your current one-bedroom condo!”
For a more detailed comparison, see Erica Alini, Is a $100,000 salary enough for a comfortable life any more? Globe and Mail, November 2023.
Trent Chappus, a 26-year-old software developer in Montreal whose income recently crossed the $100,000 line, was able to buy his first home – a condo of just under 600 square feet in the vibrant neighbourhood of Saint-Henri – without any help from family.
Mr. Chappus, who is originally from Chatham, Ont., said it’s a feat that has left many of his friends back home dumbfounded.
“They’re amazed that I’m buying a place,” he said. “My parents’ friends are amazed as well.”
What seems like a financial miracle to those watching Mr. Chappus from Southwestern Ontario has a lot to do with a track record of healthy earnings since soon after graduation. It also has to do with Montreal’s relatively low housing prices. But the city’s affordable rents also helped, Mr. Chappus said.
He lived in Montreal for more than three years in rental housing where his monthly payments ranged from less than $1,000 to $1,500, with utilities included. This allowed him to save between $1,000 and $1,500 a month. He has no plans to move back west any time soon, he said.
Median incomes are higher in Vancouver than in Toronto
Jens von Bergmann observes in a November 2017 post that median single-person household incomes in the city of Vancouver are higher than in the city of Toronto, and median incomes for households of two or more adults are also higher. But median household incomes are lower in Vancouver, because there’s so many more single-person households in Vancouver than in Toronto. (This is an example of Simpson’s Paradox.)
