jillumbach Research, Resources

Is that house really affordable? A reality check for first-time buyers

ROB CARRICK

The Globe and Mail, Wednesday, Aug. 14 2013, 7:44 PM EDT

A year in the life of Canadian households:

  • Spending on water and sewer bills up 2.7 per cent.
  • Spending on natural gas for home heating up 3.9 per cent.
  • Spending on electricity up 4.8 per cent.
  • Spending on cellphone services up 10.7 per cent.

First-time homebuyers, study these numbers because they’re your future. When you own a home, your costs move ever higher over the years. That’s why you have to consider not only affordability today, but also in the year ahead.

When you buy a first home, you know the cost of your mortgage and property taxes before you move in. But the broader range of costs is unknown by most buyers, and so is the likely rate of increase on these costs from year to year. I created a Google spreadsheet to show the basic costs of owning – you’ll find a link to it in this column from back in May. Now, let’s look at how these costs might increase from year to year.

One way to estimate how much more you’ll spend is to look at the inflation rate, which was most recently pegged at 1.2 per cent on a year-over-year basis. Another is to look at how much more actual people are paying to run their homes and live their lives. A source of this data is Statistics Canada’s survey of household spending, which looks at expenditures both major (food and home maintenance) and minor (pet food and spending on movies). The freshest numbers were issued earlier this year and they cover 2010 and 2011.

To set the stage, average hourly wage increases have been running at about 2 per cent lately on a year-over-year basis. You’re ahead of the official inflation rate at that level, but what about the specific costs of owning a home?

Total household expenditures were up 3.1 per cent in 2011, but spending didn’t rise in all areas. For example, households spent 1.8 per cent less on food purchased at grocery stores, 2.7 per cent less on clothing and 2.2 per cent less on household cleaning supplies. In any given year, you will get some spending breaks as a homeowner.

More often, costs will rise from year to year. In 2011, Canadian households paid more for most utilities, notably cellphone service and Internet. Spending on property taxes rose 2.7 per cent, while home maintenance and repair spending jumped almost 7 per cent and home insurance spending rose 5 per cent. After the flooding this summer in Alberta and Toronto, you can count on more big home insurance premium hikes in the year ahead.

The survey of household spending represents the experience of just one year compared with another, but as a long-time homeowner I can tell you it’s on the money. So don’t hesitate to use the 3-per-cent overall increase in total household spending from 2010 to 2011 as a guide on what to expect from here on. Note: Financial planners often use 3 per cent as a long-term estimate of inflation. No savvy planner would use the latest 1.2 per cent rate because it reflects the unusual financial conditions of the past few years.

The most unpredictable factor in household spending is unfortunately the most important – mortgage costs. Check out what’s happened as a result of the half-a-percentage-point increase in five-year fixed mortgage rates earlier this summer. On a house with a mortgage balance of $350,000, the rise in rates would have bumped up the cost of monthly payments by 5.5 per cent, if you assume a 5-per-cent down payment and a rise in mortgage rates to 3.39 per cent from 2.89 per cent.

The average posted five-year mortgage rate over the past decade was about 6 per cent. You can cut that down to 4.25 to 4.5 per cent to factor in today’s rate discounting trends, but you’re still looking at a major cost increase over today’s rates. On that $350,000 mortgage, the jump from 3.39 to 4.25 per cent would increase payments by 9.4 per cent.

Recent trends in pay increases suggest you shouldn’t count on big pay increases to soak up the cost of higher mortgage rates and household costs down the road. This makes it imperative to buy less house than you can afford now, ideally much less. Cut yourself some slack

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jillumbach Advocacy, Research

Household Food Insecurity in Canada Report, 2011

July 25, 2013

Naomi Dachner is a contributor to the first of a series of annual reports on household food insecurity in Canada. The report is an initiative of PROOF, a Canadian Institutes of Health Research (CIHR) funded research program launched in 2011 to identify effective policy interventions to address household food insecurity.

1.6 million Canadian households experienced food insecurity in 2011

She writes in her blog on homlesshub.ca:  I have two main sources of frustration as someone who has been involved in food insecurity research in Canada for the past 15 years. First, I am appalled by the lack of government attention directed at household food insecurity. In Canada, we have social policies that are meant to mitigate poverty, but we have no policies that target food insecurity, a clear indicator of brutal material deprivation, and one that is closely linked to poor health. Second, I have always been troubled by the media’s and others’ continued reliance on food bank use statistics to define the problem of food insecurity or hunger in our country. Although understandable since other numbers have not been readily available, these statistics diminish the magnitude of this very serious social and public health problem by counting only those who use food banks.

While food bank users represent a very vulnerable group of food insecure, they account for roughly one-quarter of food insecure Canadians. Consider the difference between the 851,014 people who used food banks reported in the Food Banks Canada 2011 Hunger Count and the 3.9 million people living in food insecure households that same year captured in the nationally representative, Canadian Community Health Survey. This shows that many more people than those who seek food assistance are struggling to get enough food.

PROOF’s report on household food insecurity, 2011 marks the beginning of an initiative to make regular, timely summaries of national population statistics on food insecurity more publicly available. The report reveals that almost 3.9 million Canadians experienced some level of food insecurity in 2011, including 1.1 million children! The problem is not under control, with over 450,000 more people experiencing food insecurity in 2011 than in 2008. The report provides detailed information about the extent of food insecurity, what the problem looks like in each province and territory, trends over time, and who is most affected. This information directs us to where urgent policy development is needed. For example, two-thirds of people who rely on social assistance in Canada are food insecure which tells us something out the inadequacy of this policy vis a vis food insecurity. At the same time, the largest numbers of food insecure are found among households who report wages, salaries or self-employment as their main source of income, suggesting that employment in and of itself is not protective.

PROOF hopes that the release of this report will draw attention to the true magnitude of the number of people that face insecure access to food and raise critical awareness of the necessity for this problem to be recognized in policy making. The seriousness of the situation, its impact on individuals, families, communities, on our health care system and economy overall, cannot be overstated, and effective responses are urgently needed from all levels of government.

Household-Food-Insecurity-in-Canada-2011

jillumbach Advocacy, Research, Upcoming Events

Ontario Poverty Reduction Consultations 2.0 – Update & Discussion Questions

By late July 2013, the Ontario government plans to start consultations on the second phase of the Poverty Reduction Strategy (PRS), which are expected to be completed by the end of September. The first 5 year phase of poverty reduction efforts focused on reducing child poverty by 25% between 2008 and 2013. Ontario Campaign 2000 and others have been tracking the government’s progress in following through on poverty reduction policies and keeping to the first PRS’ targets and timelines.

Child Poverty Trends in Ontario:

  • The most recent data from Statistics Canada shows that the overall child poverty rate in Ontario declined by 9.2% between 2008 and 2011 (Low Income Measure After Tax).
  • In 2011, the child poverty rate in Ontario was 13.8%
  • In 2011, 371,000 children lived in poverty in Ontario[1].
  • The 2012 Ontario Report Card explores social assistance reform, child care, housing, youth issues, employment and more. You can download it here for more context: http://www.campaign2000.ca/Ontario/reportcards/2013ReportCardOnChildPovertyOntario.pdf

Poverty Reduction Strategy Refreshers:

You can find Campaign 2000’s latest chart from the 2012 report card below on page 3. Read it for a sense of key commitments and whether or not they had been met as of February 2013.

Review the Poverty Reduction Strategy document (2008). To see what was proposed, visit http://www.children.gov.on.ca/htdocs/English/breakingthecycle/report/index.aspx.

You can also check out The Poverty Reduction Act (2009) outlining government’s responsibility to assess the current strategy, consult the public and formulate the next PRS:

http://www.e-laws.gov.on.ca/html/source/statutes/english/2009/elaws_src_s09010_e.htm

A questionnaire has been circulated to Poverty Task Force members for the pre-consultation planning.  Look for more to come on the community and partner consultations.

[1] Statistics Canada.  CANSIM Table 202-0802 using LIM AT for 2011.

jillumbach Research

HomesNow report uncovers affordable housing barriers

8 July 2013

A new report produced by HomesNow, an initiative of Simon Fraser University’s Centre for Dialogue, takes an in-depth look into the factors that impede home ownership, while providing actionable recommendations. Entitled ‘The HomesNow Initiative: Affordable Home Ownership in Greater Vancouver,’ the report also studies the barriers that prevent municipalities from acting on affordable housing for low to middle income residents.

WhileHomesNow was not able to generate the momentum required to build new affordable housing,the initiative did reveal many of the challenges that prevent new affordable homeownership options from being created, despite stated intentions and commitments to this goal.

At present,municipal governments are not committed to lead in the creation of new affordable home ownership. They have plans and policies in support of affordable housing but lack both the resources to provide deep subsidies and a clear consensus to support shallow ones. Partnering with senior governments on the former has been the typical way that municipalities have been involved. However, because federal and provincial governments provide less funding for these projects than in the past, that system is not meeting the need for affordable housing.

For a municipally supported housing project that will achieve a modest decrease in price or rent for moderate income households, as was intended by the HomesNow initiative, there needs to be strong leadership that understands and can communicate the value of this type of housing to the public.

Further innovation in the provision of affordable housing is possible and is necessary. Some successful projects have been done without extensive senior government involvement and inspire the search for a working and replicable model to provide what is otherwise unobtainable for many ofthe residents of Greater Vancouver: a home thatthey can afford. This
innovation will require a new understanding of the role of municipal government or a renewed commitment to affordable housing on the part of senior governments. These changes will require a strong voice  from the public in support of affordable housing – not just for those who are most in need, but also for modest and middle income earners who still cannot find suitable housing.

‘The HomesNow Initiative: Affordable Home Ownership in Greater Vancouver,’ identifies best practices, innovations, and areas of improvement when it comes to affordable housing, ultimately urging the 12 municipalities across Metro Vancouver to take action in breaking down governmental, physical and policy barriers.

The report, along with more information about HomesNow, can be found online.

Simon Fraser University: Engaging Students. Engaging Research. Engaging Communities.