DEMOGRAPHIAINTERNATIONAL HOUSINGAFFORDABILITY2021 EDITIONPresented by the Urban Reform Institute and the Frontier Centre for Public Policy

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TABLE OF CONTENTSIntroduction 51 Assessing Housing Affordability 62 International Major Market Housing Affordability in 2020 73 Decades of Worsening Housing Affordability 94 The Housing Affordability Problem: Threat toMiddle-Income Households 115 Pandemic Year 126 Telework (Remote Work) and Housing Affordability:A Ray of Hope? 13Sources and Methods 16Photo credits: Cover and Table of Contents photos by La Citta Vita on Flickr, used under CC 2.0 License

TABLES1 Demographia Housing Affordability Ratings62 Major Market Housing Affordability by Nation73 Major Housing Markets Ranked by Affordability:Most Affordable to Least Affordable15FIGURES1 Descent to Severely Unaffordable Ratings 82 International House Price to Income Ratios 93 Median Multiple Range: 1950-2020: United States 94 Median Multiple Range: 1971-2020: Canada 95 Housing Share of Excess Costs of Living 116 Telework by Nation During the Pandemic 13

IntroductionIntroductionThe Urban Reform Institute and the Frontier Centre for Public Policy are pleased to present the2021 edition of Demographia International Housing Affordability. This report provides housingaffordability ratings, using the median multiple, a measurement of income in relation to housingprices, or 92 major markets (metropolitan areas) in eight nations for the third quarter of 2020.In this year of the global pandemic and lockdowns, it is not surprising that housing affordability —given the large influx of new buyers, particularly in suburban and outlying areas — has continuedto deteriorate. As a result many low-income and middle-income households who already havesuffered the worst consequences from housing inflation will see their standards of living furtherdecline.The affordability issue is particularly critical due to the strong increase in remote working (telework) during the pandemic which is accelerating the movement to more affordable places. It willlikely also help flatten or even reduce prices in the highest cost housing markets as other households seek less costly housing elsewhere.We hope that the losses sustained during the pandemic will be quickly reversed and the increasing inequality attributable to higher house prices will become a thing of the past.Wendell Cox is the author, having previously co-authored the annual Demographia InternationalHousing Affordability Survey, with Hugh Pavletich of Performance Urban Planning. Cox is a seniorfellow at both the Frontier Centre for Public Policy and the Urban Reform Institute.Charles BlainPresidentUrban Reform Institute.3900 Essex Lane, Suite 1200Houston, Texas 77027Peter HollePresidentFrontier Centre for Public Policy203-2727 Portage AvenueWinnipeg, Manitoba R3J 0R22021 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY 5

1 Assessing Housing Affordability1 Assessing Housing AffordabilityDemographia International Housing Affordability rates middle-income housing af1fordability in 92 major housing markets (1,000,000 or more population) in 8 nations(Australia, Canada, China [Hong Kong only], Ireland, New Zealand, Singapore, the United2Kingdom and the United States). This 2021 edition rates housing affordability for thethird quarter (September quarter) of 2020.Sometimes housing affordability is evaluated simply by comparing house prices. Betweenhousing markets, however, housing affordability requires consideration of both house prices andincomes. Housing affordability is house prices in relation to incomes.Demographia International Housing Affordability uses the “median multiple” to rate middle-income housing affordability. The Median multiple is a price-to-income ratio of the medianhouse price divided by the gross median household income. Price-to-income ratios have been3widely used, such as by the World Bank , the United Nations, the Organization for InternationalCooperation and Development (OECD), the Joint Center for Housing Studies at Harvard Universityand others. Housing affordability measures that use median house prices and incomes particularly to measure middle-income housing affordability. This is done in part by measuring middleof the incomes and house price distributions, which excludes the influence of higher income andluxury housing.Middle-income housing affordability is rated in four categories,ranging from the most affordable(“Affordable”) to the least affordable(“Severely unaffordable”), as isindicated in Table 1.Table11 DEMOGRAPHIAHOUSINGDEMOGRAPHIA HOUSING AFFORDABILITY RATINGSAFFORDABILITYRATINGS Median MultipleHousing Affordability RatingAffordableModerately UnaffordableSeriously UnaffordableSeverely Unaffordable3.0 & Under3.1 to 4.04.1 to 5.05.1 & OverMedian multiple: Median house price divided by median household incomeThe Geography of Housing AffordabilityMost international housing affordability evaluations are at national level, but Demographiafocuses at the major housing market level within nations because differences between housingmarkets in a country can be substantial.123Housing markets (and labor markets) are generally metropolitan areas, which are the “functional” definition ofcities. This is in contrast to individual municipalities, often called cities, and are typically numerous in all but afew of the housing markets in Demographia International Housing Affordability.Demographia International Housing Affordability provides analysis similar to the major market analysis in the 16editions of the Demographia International Housing Affordability Survey, co-authored by Wendell Cox and HughPavletich (2005 to 2020).See Shlomo Angel, Housing Policy Matters: A Global Analysis. Oxford University Press, 2000.2021 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY 6

2 International Major Market Housing Affordability in 2020A housing market is defined by the ability of residents to reach employment by daily commutes.Generally this can be defined as a maximum 60 minute one-way commute time, while averagework trip times tend to be about 30 minutes in most areas. Housing markets are thus also labormarkets, which are also called metropolitan areas. In a well-functioning market, middle-incomehouseholds should be able to afford the median priced house.Thus, affordability measured at the housing market level is different than housing affordability ina neighborhood or part of the housing market. Even if housing is unaffordable in part of the housing market, there should still be enough housing stock affordable enough to meet the demands ofmiddle-income households.Housing affordability comparisons can be made, (1) between housing markets (such as comparison between Adelaide and Melbourne) or (2) over time within the same housing market (such asbetween years in Adelaide).2 International Major Market Housing Affordability in 2020Housing affordability has deteriorated materially in recent decades (Section 3), whichhas been a principal factor in an internationally observed reduction in middle-incomestandards of living (Section 4).Table 2 summarizes the housing markets by housing affordability ratings by nation and Table 34includes the housing affordability ratings for all 92 markets in 8 nations.2 MAJOR MARKET HOUSING TableAFFORDABILITYBY NATION2MAJOR MARKET HOUSING AFFORDABILITY RATINGS BY NATIONAffordable(3.0 & fordable(4.1-5.0)SeverelyUnaffordable(5.1 & Over)TotalMedianMarketAustraliaCanadaChina: Hong Kong onlyIrelandNew ZealandSingaporeUnited KingdomUnited Only four markets are rated affordable (with median multiples of 3.0 or less) --- Pittsburgh,Rochester, Buffalo, and St. Louis (all in the United States).4As a matter of information, the Institute for Urban Economics in Moscow (IUE) has produced its second annualnational housing affordability report (Housing affordability in the major Russian metropolitan areas: 3rd quarter2020) which uses the median multiple.2021 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY 7

2 International Major Market Housing Affordability in 2020At the other end of the scale, there are 36 severely unaffordable major housing markets. The leastaffordable are Hong Kong (20.7), Vancouver (13.0), Sydney (11.8), Auckland (10.0), Toronto (9.9),Melbourne (9.7), San Jose (9.6), San Francisco (9.6), Honolulu (9.1), London (8.6) and San Diego(8.0).The last year has involved material setbacks, mostly due to the impact of the pandemic (Section4), which has led to a home buying boom in some areas while suppressing incomes. Housingaffordability deteriorated by more than 1.0 median multiple points in just one year, — the equivalent of one year’s pre-tax median household income — in Vancouver, San Jose, San Francisco andHonolulu, with the greatest deterioration in Auckland (1.4 points) and Toronto (1.3 points). Thedeterioration was from 0.5 to 1.0 --- six months of household income --- in Sydney and San Diego.Virtually all of the markets with severely unaffordable housing have urban containment policiesthat severely restrict building on the periphery (Section 3).The number of housing markets that have become severely unaffordable in the United Statesand Canada has grown steadily since 2004. Housing affordability deteriorated the equivalentof six years of annual household incomes in Toronto, between two and three years in Montreal,Portland and Ottawa-Gatineau and by 1.5 to 2.0 points in Seattle and Denver (Figure 1). By 2004,all of the major markets of Australia and New Zealand had become severely unaffordable.1 Descent to Severely Unaffordable Ratings2021 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY 8

3 Decades of Worsening Housing Affordability3 Decades of Worsening Housing AffordabilityHistorically, housing affordability had been similar between nations until a few decadesago. For example, national price-to-income ratios were 3.0 or less in Australia, Canada,Ireland, New Zealand, the United Kingdom and the United States until the late 1980s or1990s,. However since that time, housing affordability has deteriorated significantlyand by 2019 national median multiples had increased to 4.0 in the United States andCanada, nearly 6.0 in Australia and 7.0 in New Zealand (Figure 2).Median Multiple Range: 1950-2020: United2 International House Price to Income Ratios 3StatesBefore, there was relatively little difference inhousing affordability measured against incomes among housing markets. For example,in the United States, all but one of today’s 53major metropolitan areas in the United Stateswere “affordable” in 1970 (New York was the5exception, with a median multiple of 3.2.)The difference between the least affordableand most affordable markets, measured inmedian multiple points, expanded from 1.7 in1970 to 3.5 in 2000 and 7.2 in 2020 --- morethan four times that of 1970 (Figure 3, above).4 Median Multiple Range: 1971-2020: CanadaIn Canada, the difference among the six major markets was 1.5 median multiple points in 1971,rose to 2.5 in the mid-2000s and is now 9.3, more than six times that of 1971 (Figure 4). In Australia,6the maximum difference was 2.0 median multiple points in 1981, which had risen to 5.8 in 2020.56Derived from data reported in the 1970 United States census.By 2004, all of the major markets in Australia and New Zealand had become severely unaffordable, unlike theUnited States and Canada.2021 DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY 9

3 Decades of Worsening Housing AffordabilityThese trends have been more pronounced since the early 2000s. The earliest DemographiaInternational Housing Affordability Surveys rated up to 16 major markets in Canada and theUnited States as “affordable,” with a median multiple of 3.0 or less. By 2019, the number haddropped to 10, and, as noted above, has fallen even further in the pandemic year of 2020, withonly four markets rated “affordable.”A considerable body of research associates worsening housing affordability with the implemen7tation of stronger land use regulation. At the same time, many housing markets have adoptedperhaps the most stringent land use regulation, urban containment at the housing market level,which is associated with substantially higher land costs.URBAN CONTAINMENTThe largest housing affordability differences between major metropolitan areas aroseas significant restrictions on urban fringe housing development were applied. Thesemeasures are called “urban containment” and include “growth management” and“compact city” policies. A principal purpose of urban containment is to curb the physicalexpansion of urban areas – that is, conversion of rural land to urban land, or what somerefer to as “urban sprawl.” This can result in far higher housing costs.Urban containment’s prototypical strategy is urban growth boundaries encircling urbanareas. Urban containment can render it impossible to profitably build tracts of housingaffordable to middle-income households due to much higher land prices. Accordingto urban planning literature: “Urban development is steered t

2021 edition of Demographia International Housing Affordability. This report provides housing affordability ratings, using the median multiple, a measurement of income in relation to housing prices, or 92 major markets (metropolitan areas) in eight nations for the third quarter of 2020. In this year of the global pandemic and lockdowns, it is not surprising that housing affordability — given .