Addressing the gaps in measuring affordability
There is currently a metric to measure housing affordability — the 30% shelter cost-income ratio (STIR).
This metric indicates that households spending more than 30% of their income on housing are likely to experience housing affordability challenges. Though easy to understand, it does not indicate if a household can afford basic non-housing expenses like food and transportation after paying for housing.
The housing hardship concept helps address this gap.
It measures if each household has sufficient income to pay for non-housing necessities in addition to housing expenses using Statistics Canada data sources. It considers a household's net income after taxes and transfers, including all expenditures related to housing including rents, utilities, mortgage payments, etc., as well as family size and location.
How to measure housing hardship
The housing hardship concept uses the Market Basket Measure. This is a low-income measure developed by Statistics Canada and Employment and Social Development Canada to:
- approximate the cost of a basic basket of goods and services,
- establish expenses relating to a minimum living standard.
A household that cannot afford a basic basket of non-housing goods and services, after paying for their housing, is identified as being in housing hardship.
The housing hardship concept was recently adapted in CMHC research.
Top 3 reasons for a new affordability metric
- Varying family sizes, not factored into other metrics, will greatly affect disposable income per person after paying for housing cost
- Some households paying less than 30% of their income on housing, and technically not identified as living in an unaffordable situation, may still be unable to afford necessities.
- Regional cost of living disparities affect affordability.
Examples of how housing hardship adds to the affordability story
- Households in eastern provinces experience higher incidences of housing hardship than the national average. If we were to just look at their STIR metrics, it would indicate they have the same average rate of households in an unaffordable situation as the national average.
- London, Ontario receives less attention during housing affordability discussions, but has higher than average rates of housing hardship.
Knowing if Canadians are able to pay for basic necessities beyond their housing and spending more than 30% of their income on housing enhances our understanding of complex issues related to housing affordability in Canada.