"If you want affordable housing go to Detroit" - Sauder School of Business

Posts have been few lately due to circumstances beyond our control, but we couldn't let this latest gem go by unreported.

In today's Vancouver Sun there is an article titled "Housing affordability not as cut-and-dried as it seems. Complex issue: The figures look daunting, but somehow Vancouverites have been coping with the cost"

The Sun reports that the simple numbers on housing affordability in Metro Vancouver are unequivocally alarming: It costs just over 8½ times the median after-tax household income of $61,975 to buy a home for the median price of $517,677.34.

Compared to the norm in banking circles just a generation or two ago when low-equity borrowers were likely to be denied a mortgage if the cost of the house they wanted was more than three times what they earned in a year, this seems insane.

But the article argues that if you look at the issue more closely, the message is nuanced and somewhat mixed.

Today's 8.5-to-one ratio is, to be sure, quite a bit worse than 20 years ago when it was 6.6 to one, and even worse still than the 5.9 to one figure in 2003. But ...

These historical ratios, though lower than today's, were still very high by any conventional measure, and they never once dipped to a low or even "normal" level during the entire duration of the last two decades. Yet Vancouverites still coped, and the population still grew by well over 500,000 in that 20-year period...

Half the reason for a high priceto-income ratio is not the cost of a home, but rather the lacklustre growth of personal incomes in Metro Vancouver over recent years to the point where we trail most major cities in Canada. If this turns around - and, once again, there are no guarantees - the affordability squeeze will ease.

The central message?

Robert Helsley, dean of the Sauder School of Business, added an additional perspective when he spoke last week at a UBC-sponsored symposium on affordability. He suggested Vancouver's high home prices are "the price of admission" to this amenity-rich little corner of the world.

Similarly highly priced real estate is found in other places where people really want to live - Hong Kong, San Francisco, London and New York, to name a few.

"If you want affordable housing," Helsley said, "go to Detroit."

Instead of calls to halt the easy credit and low interest rates that fuelled and created the unaffordability to begin with, we get sermons to 'let them eat cake'.

Marvellous.

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