In my campaign for a seat on City Council, I’m frequently asked what I think the #1 issue in this election is. To me, the answer is clear: housing affordability. Here’s why:
- You will struggle to buy whole, local foods if all your money goes into paying for housing.
- You can’t start or grow your business if all your money is going toward housing, or paying higher wages to keep your employees housed.
- You can’t participate in your community if you’ve cobbled together three jobs and are constantly working in order to pay for housing.
- You can’t save to buy a home if a significant portion of your wages is going toward your rent.
- You can’t cut down on your carbon emissions if you have to commute to work in Nelson because you can’t afford to live here.
The more I learn about the challenges Nelson faces with regards to housing affordability, the more I realize I have to learn. I’ve read the reports from our 2010 Housing Strategy, and I’m looking forward to the update to the strategy that is expected in the next few months. And I’ve met with a number of people working in our affordable housing sector. We are lucky to have such great organizations working to help our most vulnerable citizens, but as any of them will tell you, the crisis is growing and they are struggling to keep up.
So what’s causing our housing crisis?
Like all great places, we basically have too few houses for the number of people who want to live here. You can’t have people writing glowing articles in national publications, calling Nelson “one of Canada’s most livable ski towns”, without it resulting in people packing up their stuff and making tracks to this magical place. As a result, Nelson has become seriously unaffordable for a lot of people. Many of us feel this intuitively, and the data backs this up.
Nelson is “Severely Unaffordable” for the average family
I recently did some research into how Nelson rates in terms of affordability. Using the same calculation model as that used by urban planning expert Alain Bertaud (former principal planner at the World Bank and author of the 10th Annual Demographia International Housing Affordability Survey), it turns out that we rank not far behind Toronto and NYC.
According to Demographia’s rating system, Nelson falls into the same “Severely Unaffordable” category as those two cities.
Using Bertaud’s formula to calculate affordability rating, you take the median house price in a city and divide it by the median household income in that city. The resulting number is the city’s affordability rating. According to Bertaud, an affordability rating of 3 or less is considered good.
According to MLS data, the median price for houses sold in Nelson in 2014 is $307,000. Our median household income is approximately $
60,000 $51,000.* Dividing house price by household income, it turns out that Nelson has an affordability rating of 5.1 6. That’s not good. In fact, it’s really bad. According to the housing affordability survey I cited above, a rating of 5.1 or higher is classified as “Severely Unaffordable”.
To put our
5.1 6 rating into perspective, Toronto and New York City have affordability ratings of 6.2.
(UPDATE: So this is embarrassing. When I first published this post, I accidentally grabbed the average household income for Nelson, NOT the median as is required for the equation. Instead of calculating from the average income which was $51,717 in 2005, I should have worked from the median, which is $43214. Calculating a .2% increase every year for nine years we now sit at $44,000. So even if I optimistically bump it up by an additional $7,000 as I did previously, we still only have a median income of $51,000. So now our affordability rating sits at 6%, which is much worse. (And if you don’t feel optimistic, and don’t include that $7K bump, we actually sit at 6.9%, which is significantly higher than Toronto and NYC.)
Renters fare no better. In its 2013 Report Card on Homelessness, Nelson’s Committee on the Homeless found that 46% of renters spend 30% or more of their income on shelter. So almost half of all renters are paying more on housing than the recommended amount for achieving financial stability. For some, this might not be that much of a struggle, but what if you also have to pay for childcare? Or if your income is so low that you are not hovering around the 30% mark, but closer to 50% or more?
So what can we do about it?
Focus on homegrown solutions
Solution 1: Relax bylaws and regulations around secondary suites and infill development
We can’t make houses cheaper. (Well, actually, we can, but only for a small proportion of a very specific type of housing. More on that in the next section of this post.) But we can make them easier for the average person to afford. Secondary “mortgage helper” suites and laneway houses aren’t a new idea, but right now it’s difficult and expensive for homeowners to develop these.
Making it easier to install mortgage helper suites will not only make it possible for more people to afford to buy a home, it will increase our stock of market rental housing. With vacancy rates currently hovering between 1-2%, we need to try to bring it up to the recommended level of 3%. More rental housing stock should create more choice, and help slow down the increase in rental prices. Nelson has made some progress towards this goal over the past decade, but there is much more we can do.
I would like to convene a working group of designers, builders, city staff, and homeowners who have recently gone through the process of installing a suite, to examine the barriers and challenges they faced. Having served on Nelson’s Advisory Planning Commission, I know there are a few things we could do right away that would likely help, but I’m sure the right team could find more opportunities. In a matter of months, we should be able to produce a list of bylaw recommendations to council. This group should also be able to suggest a process for creating incentives, as well as more transparency around the application and approval process.
Solution 2: Create a perpetual affordable housing program
Nelson isn’t the only Western community with severely unaffordable housing. Whistler and Canmore are both highly desirable places to live, with seasonal fluctuations in population, high home prices, and high rents. The key difference between us and them is that they’ve taken definitive steps to create perpetual affordable housing programs (PAH, or sometimes also called Community Land Trust, CLT).
So what is PAH? PAH provides homeownership and rental housing opportunities that remain affordable regardless of developments in the housing market. PAH can be a mix of homeownership or rental opportunities wherein resale and rental price formulas are used to calculate how much the price may increase in value over time. Properties for sale usually see very small annual increases, and rental housing is usually maintained at 10% below market cost. PAH is developed and maintained by non-profit corporations under the direction of a municipality, as in the case of Whistler and Canmore.
Development of PAH is usually negotiated between a municipality and developers, wherein a developer will either provide some affordable housing onsite in exchange for zoning changes that allow density increases, or through cash in lieu for developments on city-owned properties. This is sometimes called a Density Bonus. We haven’t seen much activity like this in Nelson yet, because we haven’t had many large developments, but Nelson Commons will be offering three such suites (they are calling them “Restricted Resale Homes”) for purchase, and there may be an opportunity for discussion with Nelson Landing now that they are coming back to the table to negotiate a 30% density increase.
We might not yet have the right type of development for this model to work, but I think it’s worth investigating the feasibility of creating a non-profit corporation that develops this type of affordable housing in Nelson. Fortunately we have so many examples available in other communities, we don’t have to re-invent the wheel.
Solution 3: Control property taxes
As an added stress, Nelson homeowners also pay among the highest taxes in the province, as I wrote about in this post about our police budget. According to this 2010 survey, we are 26th in the province for taxes. And that’s with us being subsidized by the profits we earn from Nelson Hydro. Without this income, our taxes would be even higher — 35% higher, to be specific — making us one of the top ten most expensive cities in the province. And it’s not just homeowners paying the price. Higher property taxes translates to higher rents for tenants.
Just to be clear, I’m not here to “stop the gravy train”, because I don’t think there is one. I believe city staff and council have increased taxes to pay for what we need. But I do think we must start taking a hard look at anything that will further increase our taxes without generating revenue or benefits for the city, residents, and businesses.
Solution 4: Continue to lobby for affordable housing
Nelson’s stock of affordable housing is under threat. Cutbacks at the federal level will soon end (or has already ended) subsides for seniors, low income, and co-op housing. How exactly the difference will be made up at this point is unclear, but every community in Canada will be affected.
We must continue to add our voice to those from across the country to demand the federal and provincial governments stop downloading their duties onto local governments. And we must continue to work with our partners in the affordable housing sector to call for on-going support for existing units, and investment in new housing to meet the growing demand. Likewise, we must support these organizations in their push to renovate existing stock, and plan for future developments should the winds shift again to favour investing in new affordable housing projects.
I know I haven’t covered everything in this post. Far from it. As I said earlier, the more I research, the more I realize I have to learn. But I think I have some concrete solutions to start moving us forward. I want Nelson to remain a place that everyone — families, young adults, seniors, artists, and other people with lower-than-average incomes — can afford to make a home for themselves. Our diversity is what makes us great. This diversity is threatened when we have:
- An affordability index rating of 5.1 (Severely Unaffordable)
- 46% of renters spending 30% or more of their income on shelter
How we make it better:
- Relax bylaws, increase transparency, and consider incentives to spur creation of more secondary suites.
- Investigate creating a non-profit housing authority to develop perpetually affordable housing.
- Ease property tax burden.
- Lobby for more support for affordable housing.
*UPDATED: Real after-tax income of middle-class families in Canada grew by only seven per cent between 1976 and 2010 — or 0.2 per cent per year. In 2005, the median household income in Nelson was $43,214 (compared to provincial median of $52,709). Using the 0.2% year-over-year calculation, this means that currently, the average family in Nelson brings home about $44,000 a year before taxes. I’ve optimistically bumped that number up to $51,000, meaning that, if anything, our affordability rating could be much worse than I’ve calculated here.