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March 23, 2016

Examination of International Housing Indicators, and Estimation of 30/40 Rule and Persons per Room Using Canadian Data

Introduction

We examined international housing indicators used in Australia, England, the European Union, France, New Zealand, Scotland and the United States, for the purposes of:

  1. Identifying and describing housing indicators in the selected countries; and
  2. Evaluating the applicability of the indicators as complements to Canada’s existing indicators, which included estimating two selected indicators using existing Canadian data.

Two indicators were selected to be estimated using Canadian data:

  • The Australian 30/40 Rule for housing affordability
  • The U.S. household crowding rate

These indicators were chosen for two key reasons:

  1. The feasibility of testing, with modifications as necessary, with 2011 Canadian Census/National Household Survey data, and
  2. The potential applicability of these indicators to the Canadian housing context.

These indicators were also selected for their relevance to the Canadian housing context. Much of the current debate taking place among policy-makers, housing stakeholders, the media, and the interested public concerns the affordability of available housing. In addition to affordability, housing suitability and household crowding, particularly in the northern regions of Canada, are also important considerations. The 30/40 Rule measures housing affordability, while the U.S. household crowding rate measures housing suitability.

Findings

Of the various countries investigated, none uses a composite indicator comparable to our core housing need indicator to assess housing conditions (for a summary of all indicators investigated see Annex Table A). The majority of the indicators seek to measure specific components of our core housing need indicator (i.e., adequacy, affordability, and suitability) as opposed to establishing an integrated measure for housing need.

Estimation of the Australian 30/40 Rule

The Canadian affordability standard stipulates that households paying 30% or more of their before-tax household incomes towards shelter costs are below the standard. The Australian 30/40 Rule indicates that households encountering affordability problems (sometimes called ‘housing stress’) are spending 30% or more of their incomes on shelter costs, while earning in the bottom 40% of the income range.

The 30/40 Rule places the focus on low-income households instead of on all households below the affordability standard. Its emphasis on housing affordability for low-income households may be of interest to policy-makers and program administrators, although in omitting households in higher income brackets (the top three quintiles of the household income distribution) we found it excludes some 18% of the households below our affordability standard (see Figure 1).

Figure 1: Not all households below the affordability standard are below the 30/40 Rule

Households below the affordability standard and either below or above the 30/40 Rules


Source: CMHC (Census- and NHS-based housing indicators and data)

Text version
Households below affordability stands and the 30/40 Rule Households below affordability standard but above the 30/40 Rule
82% 18%

Our research also found that households with the following characteristics are proportionately less likely to be captured by the 30/40 Rule, as these households are generally more likely to be in the upper three income quintiles:

  • Households in Ontario, British Columbia, and Alberta
  • Households in Census Metropolitan Areas
  • Owner-occupied households with a mortgage
  • Couple family households with children
  • Immigrant households, particularly immigrant households that have been in Canada for about 6 years and longer, as well as immigrant households aged 15 – 64 years old.

Estimation of the U.S. Household Crowding Rate (Persons Per Room)

Canada’s National Occupancy Standard (NOS) used in our housing suitability standard takes into account the ages and genders of, and relationships between, household members to determine the required number of bedrooms for a household and compares this with the number of bedrooms in the dwelling.

Household crowding in the United States is assessed on the basis of Persons Per Room (PPR). It is calculated by dividing the number of people resident in the dwelling, by the number of rooms in the dwelling. A household is considered crowded if there is more than one person per room, and severely crowded if there are more than 1.5 persons per room. The PPR does not take into account household composition (ages and genders of, and relationships between, household members) nor the different types of rooms in a housing unit. Under the PPR standard, all available rooms (excluding bathrooms, laundry rooms, utility rooms, walk-in closets, pantries, and unfinished rooms) in a dwelling are considered, rather than the number of available bedrooms. The PPR standard does not reflect Canadian social norms of what may typically be considered crowded accommodation.

Our analysis examined the extent to which households are “undercaptured” (captured by the Canadian Suitability Standard (CSS) but not the PPR standard) and “overcaptured” (captured by the PPR standard but not the CSS) (see Figure 2). We found that, overall, the PPR would capture some 66% fewer households than the CSS.

Figure 2: The Persons Per Room standard would capture fewer, and some different, households than the Canadian Suitability Standard

Overcrowded households below the CSS and PPR standards, respectively, Canada, 2011


Undercaptured: captured by the CSS but not the PPR
Overcaptured: captured by the PPR but not the CSS

Source: CMHC (Census- and NHS-based housing indicators and data)

Text version
Undercaptured 559,980
Captured by both standards 233,810
Overcaptured 35,610

We also found that, households with the following characteristics are proportionately more likely to be “undercaptured” (captured by the CSS, but not the PPR standard):

  • Households in Ontario and British Columbia
  • Households in Census Metropolitan Areas
  • Households of 3 persons or more
  • Couple family households with children, lone parent family households, multiple family households, and two or more non-family households
  • Renter-occupied households

Conclusions

The Canadian core housing need indicator remains a robust composite indicator for the purpose of assessing housing adequacy, affordability and suitability. The Australian 30/40 Rule, or a variant of it, could potentially act as a complement to core housing need, given its focus on low-income households and the importance of affordability as an issue at a time of generally rising housing costs. The U.S. household crowding rate (Persons Per Room) is not seen to be as good an indicator as the Canadian Suitability Standard in assessing housing suitability as the U.S. standard does not take into account the composition of, and relationships between, household members, and was shown to produce a very much lower estimate of crowding than our indicator.

Stephanie Shewchuk, Jagannath Ojha and Jeremiah Prentice,
Housing Indicators and Analytics Division

Download the full International Housing Indicators report (PDF)

Annex Table A: Summary of international housing indicators examined
Country Indicator Housing condition measured Data source Frequency of data collection
Australia Housing condition and maintenance Adequacy Australian Survey of Income and Housing Biennial
Australia 30% Housing cost-to-income ratio; 30/40 Rule Affordability Australian Survey of Income and Housing Biennial
Australia Housing utilisation (based on the Canadian National Occupancy Standard) Suitability Australian Survey of Income and Housing Biennial
England Decent Homes Standard Adequacy English Housing Survey Annual
England Housing Health and Safety Rating System Adequacy English Housing Survey Annual
England English Indices of Deprivation (Living Environment Deprivation domain) Adequacy Numerous UK Government data sources – see The English Indices of Deprivation 2015 Technical Report Various
England Department for Communities and Local Government – Affordability indicator Affordability HM Land Registry; Annual Survey of Hours and Earnings (ASHE) Annual
England English Indices of Deprivation (Housing affordability indicator) Affordability Numerous UK Government data sources – see The English Indices of Deprivation 2015 Technical Report Various
England Statutory standard on overcrowding: Room Standard/Space Standard Adequacy English Housing Survey (Room Standard) Annual
England English Indices of Deprivation (Household overcrowding indicator) Adequacy UK Census Decennial
European Union EU severe housing deprivation rate Adequacy/Suitability EU Statistics on Living and Income Conditions (SILC) Survey Annual (primary variables); Quinquennial (secondary variables)
European Union EU housing cost overburden rate Affordability EU Statistics on Living and Income Conditions (SILC) Survey Annual (primary variables); Quinquennial (secondary variables)
European Union EU overcrowding rate Suitability EU Statistics on Living and Income Conditions (SILC) Survey Annual (primary variables); Quinquennial (secondary variables)
France Logement confortable Adequacy L'enquête nationale sur le logement Every 3 to 6 years
France Taux d’effort élevé Affordability L'enquête nationale sur le logement Every 3 to 6 years
France Sur-occupation Suitability L'enquête nationale sur le logement Every 3 to 6 years
New Zealand Perception of housing quality Adequacy New Zealand General Social Survey Biennial
New Zealand Housing cost-to-income ratio (30%) Affordability New Zealand Household Economic Survey Annual
New Zealand Equivalised household residual income Affordability Census of Population and Dwellings Quinquennial
New Zealand Criteria in the Housing Accords and Special Housing Areas Act 2013 Affordability Census of Population and Dwellings Quinquennial
New Zealand Canadian National Occupancy Standard Suitability Census of Population and Dwellings Quinquennial
New Zealand Equivalised Crowding Index Suitability Census of Population and Dwellings Quinquennial
Scotland Scottish Housing Quality Standard Adequacy Scottish Household Survey Annual (with some biennial components)
Scotland Level of disrepair Adequacy Scottish Housing Conditions Survey (Integrated component of the Scottish Household Survey) Annual
Scotland Room Standard; Space Standard Suitability Scottish Housing Conditions Survey Annual
Scotland Scottish Index of Multiple Deprivation Occupancy Rating Suitability UK Census Decennial
United States “Z-Adequacy” (ZADEQ) variable Adequacy American Housing Survey Biennial
United States Unit quality Adequacy American Housing Survey Biennial
United States Cost burdened households Affordability American Community Survey Annual (Areas with a population of 65,000 or more); Triennial (Areas with a population of 20,000 or more); Quinquennial (Data for all areas)
United States Severe housing cost burden Affordability American Community Survey Annual (Areas with a population of 65,000 or more); Triennial (Areas with a population of 20,000 or more); Quinquennial (Data for all areas)
United States Worst Case Housing Needs Affordability American Housing Survey Biennial
United States Household crowding (Persons Per Room) Suitability American Housing Survey Biennial

Canada

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