Housing affordability: BBQ stopper and election issue

It is the issue Labor leader Kevin Rudd has identified as a barbecue stopper and now housing affordability is firming as an election issue. Now, new figures show a high level of financial stress is confronting many Australian families.

Labor has jumped on figures that show one in four Australian households with a mortgage is struggling to meet repayments.

These families are spending about a third of their income or more on repaying loans.

In more bad news for the Prime Minister, the figures show mortgage stress has since risen in every New South Wales electorate, including his own.


The Wesley Mission counselling service helps hundreds of people struggling to cope with financial difficulties.

The organisation's Wendy Luckett says the housing affordability crisis is affecting many families.

"Just recently, I had a case of a family. The husband was sick - the mortgage was taken out with two incomes involved - and when the husband became sick, they couldn't keep up the mortgage payments," she said.

"They had to sell the house, so that was pretty traumatic for the family because they had to deal with relocating and they had to deal with the loss of the house.

"The husband felt as though he wasn't fulfilling his role because he was the breadwinner more or less and he felt a failure."

Posted by Canadian Funding Corp. Read more HERE

Housing Affordability at Record High

Posted by Canadian Funding Corp
One of the upsides of a crashing-and-burning housing market, as Edward Glaeser noted back in October, is that buying a home becomes more affordable.

And indeed, according to an index released by the National Association of Realtors, housing affordability was at an all-time high in December.

The Housing Affordability Index composite level for December was 158.8. A composite H.A.I. value of 158.8 means that a family earning the median income has 158.8 percent of the income needed to qualify for a mortgage on a median-priced home. (In other words, a higher index number means housing is more affordable; a lower index number means housing is less affordable.) The index had fallen during most of the housing bubble, when it became more and more expensive to buy a home. But as you’ll see in the chart below, December’s composite level was the highest the index has reached since the association began collecting this data in 1971. Read more HERE

National Affordable Housing Forum: Achieving a New National Affordable Housing Agreement

Posted by Canadian Funding Corp

24-25 July 2006, Old Parliament House, Canberra

The main purpose of the Forum was to stimulate informal discussion about principal goals and priorities for a National Affordable Housing Agreement, possible key elements of such an Agreement, and ways of building public and political support for it.

Hosted by ACOSS, ACTU, Housing Industry Association and National Housing Alliance*, the Forum brought together 60 invited participants from the housing, development and finance sectors, as well as from unions, community groups, local councils and academic experts. READ MORE

Canadian Funding Corp Housing market supply and demand

Because of supply and demand, the most "affordable" places are where there is the least demand relative to supply. Where the supply of available housing is less than the demand, low- and moderate-income households often struggle to obtain housing that is affordable. In these housing markets, rising land values often outpace rising incomes. Such housing markets often have a limited supply of residential land, or a number of regulations that make it difficult or costly to increase housing supply at rents affordable to consumers at income ranges below the local average.

Measuring demand is complicated, and subject to different views. It can be measured in terms of the costs for housing, housing type (such as apartments vs. single-detached homes, or the size and configuration of units, including number of bedrooms) and location for housing (relative to commercial/employment centers, transportation infrastructure, schools and other community resources.) A key element in measuring housing demand is differentiating between the "ability to pay" that some households have, and the "willingness to pay" of households for certain housing types in certain locations. When a place has attributes that trigger high degrees of "willingness to pay", prices often rise due to the finite supply, thereby changing that place's relationship to household "ability to pay". When a place has attributes that make it undesirable, the willingness to pay is reduced and the price falls. This explains why some places within an otherwise unaffordable area (measured in the aggregate) remain very affordable, such as a distressed inner city neighborhood in an otherwise expensive city. read more here

Millbrook Place Mississauga, Ontario - The Affordable Housing Solution

Millbrook Place is the result of an innovative corporate sponsorship initiative by Martinway Contracting, which has been in business since 1980.With support from local governments, Millbrook Place provides affordable housing for seniors, for formerly homeless or very low- income single people.
The Region of Peel, west of Toronto, is part of the Greater Toronto Area.The Region includes the City of Brampton and the City of Mississauga and the Town of Caledon; the population of the Region is 1,159,405.

Millbrook Place opened in 2003.The 10-storey building, which has a total of 163 units, offers affordable housing for seniors and for formerly homeless or very low-income single people.There are 35 two-bedroom units and 85 one-bedroom units for seniors and 43 bachelor efficiency, rent geared-to-income units for formerly homeless and very low-income singles. Rent for a two-bedroom unit is $950 and for a one-bedroom unit, $825-- below market rates for the Region of Peel. The efficiency units are 25 m2 (275 sq. ft.); the two-bedroom units, 86 m2 (925 sq. ft.). Each tenant group has its own entrance, lounge and laundry area.Amenities include outdoor walking and seating areas, a multi-purpose room, laundry room, lobby and lounge, and underground parking. Martinway Contracting sold the property to the Region of Peel at a 40 per cent discount.The Region owns and manages the building.
To cut construction costs and improve the affordability of the project, Martinway Contracting sought contributions from construction suppliers and the building trades. Even though Millbrook Place is an affordable housing project, it features quality construction and materials typical of higher-end market housing.As well, kitchens were stocked with non- perishable foods and four-piece dinner settings were included in the bachelor efficiency units.
High-quality materials were donated or sold at discounted prices for flooring, kitchen cabinets, bathroom grab bars, door bolts, balcony railings and furnishings for common areas. Energy-efficient washers and dryers were donated for the common laundry rooms.The high-quality building materials and energy-efficient appliances enhance the long-term affordability of the project. Durable materials last a long time and do not need to be replaced as often as lower quality products, while energy-efficient appliances reduce operating costs.
Martinway Contracting donated and installed a wheelchair-accessible elevator. Subtrades contributed labour, further enhancing the affordability of Millbrook Place. Martinway Contracting charged the Region of Peel $97.65 a square foot for hard and soft costs--considerably lower than the $150 a square foot that was the norm at that time in the construction industry.
The Region of Peel provided interim construction financing and issued tax receipts to contributors.The corporate sponsorship program, organized by Martinway Contracting, resulted in media attention for the contributors and the donations is believed to be among the largest for any similar affordable housing project in Canada.The Region and the City of Mississauga eliminated all development charges.The contributions and elimination of development charges helped produce a balanced budget, with no debt, for Millbrook place's first year of operation. The collaborative approach between local governments and Martinway Contracting and an innovative project that provides affordable housing to two distinct tenant groups, resulted in an "everyone wins" situation that earned Millbrook Place a CMHC Housing Award in 2004. This report was reviewed by Moishe Alexander.

Moishe Alexander Overview on Housing Starts and Affordability

Canadian Funding Corp Review and Comments by: Moishe Alexander On Housing Starts and Affordability

December 17, 2008

Canadian Funding Corporation’s Review on the Canadian Housing Starts and Affordability

As reported in the Toronto Star on December 9, 2008 by Tony Wong, the housing starts in November 2008 are down 19% from the month of October 2008. This is the biggest reduction in the Toronto market, which was down almost 30% from the previous month.

It appears that the condominium market is having the biggest effect on housing starts since condo development is included in all housing start figures. However in a stunning development, the actual new home starts are up by 24% compared to the same period last year. This figure will start to be reduced and fade away over the next couple of years as the recession takes hold.

As a result of the impact of the condominium market and its freefall, it’s expected that the 5 big banks will not actively support mortgage funding for this type of real estate property.

There are signs that the affordability of homes is starting to turn around as a result of lower interest rates starting with the Bank of Canada. The average consumer is now benefitting by approximately 1% of their pre-tax income towards the affordability of a home.

However the problem with that is that it still takes 53.3% of a person’s pretax income to afford the average $437,000.00 home in Toronto. This is about 21% above the financial institution guidelines in terms of the pre-tax disposable income, which has a maximum of 32% in order to comfortably afford a home.

The good news is that with interest rates continuing to fall and Toronto resale home prices dropping, the pre-tax income thresholds should start to decline, edging closer to the 32% guideline set by the banking institutions and credit unions.

For Canadians, we still have banking institutions and credit unions who will lend money, even in this economy and even given the sub-prime mortgage crisis which has subdued lending south of the border.

Since in Canada speculative purchasing is relatively insignificant, the losses by the Canadian banks will be minimal unlike south of the border where speculative buying and the sub-prime mortgage crises caused banks south of the border to not be in a position today to lend money on mortgages for the regular consumer.

Some additional good news for Torontonians is that the affordability of homes is significantly better than in places like Vancouver where it takes 74.8% of pre-tax income to afford the same home. Even that figure in Vancouver is down 4% from the previous quarter.

We highly recommend that you sit down and determine what percentage of your pre-tax income you can comfortably dedicate to your home using the 32% guideline as instituted by the chartered banks and credit unions.

We strongly suggest that you wait to purchase that home until the Fall of 2009, when home prices should be at the bottom.

The Toronto Star article can be read below or viewed in its entirety by clicking here http://www.thestar.com/article/548718

House prices to keep falling

'A correction is now upon us,' economist says as home building hits slowest pace since '01

December 09, 2008

TONY WONG

BUSINESS REPORTER

The real estate market may be cooling, but the upside is that Canadian homes are getting more affordable even as the nation "no longer appears to be immune to a generalized housing downturn," says a report.

"The souring of economic conditions, eroding consumer confidence and, in several instances, past excesses are creating a glacial downdraft that the majority of Canada's housing markets will be hard-pressed to resist," RBC senior economist Robert Hogue stated in the report released yesterday.

Housing start figures also released yesterday support the bank's view.

The seasonally adjusted rate of starts was a much weaker than expected 172,000 units in November, down 19 per cent from the 211,800 units recorded in October and the slowest pace of residential construction activity since 2001.

The Toronto market took the biggest hit, with starts down by almost 30 per cent from a month earlier, mostly due to the volatile condominium building sector. This may be a taste of things to come: the condo market has seemed particularly vulnerable to the downturn as developers shy away from starting new projects while trying to complete current developments in a falling market.

Year-to-date starts are actually up by 24 per cent compared with last year, as foundations are poured on projects that were sold last year. But analysts expect next year to be less buoyant as sales start to fade.

"With sales falling, credit conditions tight and fading support from condos, a correction is now upon us," BMO Capital Markets economist Robert Kavcic said.

A cooling market coupled with pressure to lower interest rates at the Bank of Canada – including a decision today that is expected to lower key rates by another 50 basis points – means homes are becoming modestly more affordable.

In the third quarter of 2008, it took 53.3 per cent of pre-tax income to afford a $436,400 bungalow in Toronto, compared with 54.3 per cent in the second quarter.

While that's a step in the right direction for those looking to buy a home, it's still a steep price of entry for many, since most financial institutions use 32 per cent of pre-tax income as a guide in determining whether someone can afford to buy a home. That figure would include mortgage expenses, property taxes, heating costs and other maintenance.

Still, results should be more dramatic in the fourth quarter, with prices in the Toronto market falling further, along with interest rates.

"For Toronto, market sentiment turned on a dime this fall," Hogue said. "Until the end of the summer, the feeling was that local housing markets were successfully negotiating landing to a slower, more sustainable pace of activity. However, notable declines in home prices and activity in many communities suddenly raised eyebrows and heightened concerns."

Hogue cautioned that "while there is no cause to panic at this stage, the GTA market has undoubtedly entered a period of consolidation. The area's economy is facing serious headwinds."

Hogue stressed the economy is in better shape in Canada than in other countries because of a host of mitigating factors, including a subprime mortgage market that was far more subdued than in the U.S. Canadian banks are also stable and still lending, while households are generally not as stretched financially, Hogue said. Also, speculative buying has not been as rampant in the Canadian market.

"These factors should provide enough of a foundation to prevent housing markets from spiralling down even as the Canadian economy slips into recession."

The Toronto area's affordability issues also appear a lot better when compared with places such as Vancouver, where it takes 74.8 per cent of pre-tax income to afford a bungalow – making it the most unaffordable city in Canada.

The good news is that's down from 78.8 per cent in the second quarter.

The Financial Post also ran an in-depth article on the housing start crisis and affordability on December 9, 2008. The Financial Post article can be viewed in its entirety by clicking here http://www.financialpost.com/story.html?id=1049974