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Housing affordability varies across the country, for a number of reasons.Fernando Morales/The Globe and Mail

Jennifer Keesmaat is chief planner for the City of Toronto; Paul Smetanin is president of the Canadian Centre for Economic Analysis.


Housing affordability is hot, and top of mind, in light of escalating prices coast to coast.

Newly established households are struggling to find places to raise families at the very moment when the characteristics of a home and location matter most. Increasingly, choosing where to live involves tradeoffs. Is a smaller place closer to work and transit that costs more a better option over a larger place with a longer commute? Many of us compromise wants – or even some needs – as we evaluate and negotiate our household finances.

With housing prices seemingly out of control, at least in Vancouver and Toronto, many are having to compromise more than they used to. There is no question that strong policy and a concerted effort by all levels of government is urgently required to address affordability. But to be effective, policy must be properly grounded in sound data and analysis.

The traditional economic analyses commonly used to measure housing affordability rely on one-size-fits-all economic rules, averages and behaviour. This approach, quite simply, fails to illustrate the full picture. When it comes to shelter, significant nuances are missed with respect to individual household needs and wants, thereby skewing what needs to be done to address the overall challenge.

Clearly, while our economy is complex and interconnected, current discussions about housing affordability have yet to fully appreciate these relationships. As a result, our policy tools will fall short in effectively responding to the problem. The most widely used housing affordability indexes do not consider the many characteristics of shelter, nor who is truly at risk in relation to meeting their shelter needs. Generalizations undermine both our understanding of who is impacted and therefore in need of support. A more sophisticated framework is required.

This is why a new measure was introduced, the Canadian Centre for Economic Analysis's Shelter Consumption Affordability Ratio (SCAR) index. SCAR measures the proportion of income that households devote to their shelter-related needs (including transportation, utilities and maintenance) after paying for other necessities (such as health care, food and child care).

Unlike other housing affordability indexes, SCAR does not measure affordability by simply measuring housing prices or mortgage rates. Rather, SCAR presents a much more realistic representation of what people face every day when trying to put roofs over their heads.

So while other affordability indexes currently sit just above their long-term averages, SCAR is at an all-time high, rising quickly over the past 10 years. Today, after purchasing other necessities, a typical Canadian household spends nearly 40 cents of every dollar of income it has left over on shelter – but this is a highly aggregated average. By disaggregating these data, we learn that a quarter of Ontario households are spending more than 60 cents of every discretionary dollar on shelter! And this is an average, too – many households spend more.

Looking across the country, different reasons for this affordability squeeze emerge. While British Columbia's affordability issues are largely driven by housing prices, in Nova Scotia – the province identified as the least affordable in Canada, with the highest SCAR value at 46 cents a dollar – the affordability pressures are driven more by lower incomes, high taxes and high utility costs.

Ontario? Child care and high utility costs appear to be driving factors. As a result, addressing high child-care costs would be an effective way to mitigate high household costs for families in Ontario. Digging deeper (say across the City of Toronto) would show similar variations: what drives affordability in one neighbourhood looks very different to others.

There is more to understanding and addressing housing affordability than real estate values and interest rates. Stable, secure housing is essential to health, employment and accessing higher education. And yet there is no silver bullet. We have a moral obligation to approach this issue with due diligence, assessing the full picture of household costs and the ways that these costs vary from place to place, in a manner that is nuanced, and meaningful.

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