OPINION: Businesses Need to Keep Housing Costs in Mind

The issue of “affordability” was featured prominently in the recent federal election campaign this past October. It also played a role in the 2017 B.C. election that saw the NDP form a minority government. High housing costs in the Lower Mainland and Greater Victoria are at the heart of public concerns over affordability in the B.C. context.

Globally, the ratio of median house prices to median incomes sits in the range of three-to-six for most urban communities. In Metro Vancouver, the ratio is closer to 12, which is among the steepest in the world. While in the Victoria area it hovers in the vicinity of seven-to-eight.

In the heated political debates over housing costs, there is tendency to focus solely on home prices. However, it is also important to pay attention to incomes. After all, in the end, judgments about what’s “affordable” are partly informed by the levels of income enjoyed by the broad population.

The financial resources available to people are best measured by looking at incomes after subtracting direct personal taxes and adding back money received from government (such as Employment Insurance, child benefits, and Old Age Security and Canada Pension Plan payments). Statistics Canada recently published estimates of disposable incomes for both families and individuals not in families for 2017, covering all census metropolitan areas (CMAs) in the country. The agency focused on the incomes of the typical household among families, as well as the typical household consisting of single individuals. All forms of income (including government cash transfers) were counted, except for capital gains.

A Matter of the Median

The median after-tax income for Canadian families and individuals not in families combined stood at $52,330 in 2017. Adjusted for inflation, this was up 1.8 per cent from 2016, but it was just 4.6 per cent higher than in 2012.

Among the biggest 35 urban regions in Canada, Lethbridge, Metro Vancouver and Montreal had the fastest growth in median after-tax income between 2012 and 2017. Calgary and Edmonton posted the weakest growth over the same period — with the oil price collapse of 2014-15 being a key factor behind their poor showing.

Median After-Tax Income*,
Census Families and Individuals, Select Canadian CMAs017
Calgary

$63,830

Victoria

$55,800

Edmonton

$63,030

Greater Sudbury

$55,790

Ottawa-Gatineau

$62,100

St. John’s

$55,480

Guelph

$60,950

Kelowna

$53,740

Oshawa

$60,810

Quebec City

$52,790

Regina

$60,080

Vancouver

$52,000

Saskatoon

$58,410

Toronto

$51,760

Lethbridge

$57,400

Abbotsford-Mission

$51,740

Kitchener-Waterloo

$57,290

Halifax

$51,720

Hamilton

$56,540

Montreal

$47,510

Kingston

$56,070

Canada Average

$52,330

* In 2017 constant dollars.

Source: Statistics Canada.

The accompanying table provides data on median household income for the four CMAs located in British Columbia, several other cities, and Canada as a whole. The highest median income in “urban B.C.” is found in the Capital Region (Victoria), followed by Kelowna, Greater Vancouver and Abbotsford-Mission. All four British Columbia CMAs recorded solid increases in median incomes between 2012 and 2017. That isn’t surprising, inasmuch as B.C. led the country in aggregate economic growth over this period.

Housing Hounds After-Tax Incomes

Despite this, British Columbia’s place in the Canadian — let alone the international — income pecking order leaves much to be desired, particularly considering the high cost of housing in the province. Median after-tax household incomes in B.C. cities are well below the levels reported in the country’s richest urban communities, as shown in the table. Calgary, Edmonton, Lethbridge, Regina, Saskatoon, Ottawa-Gatineau, Guelph, Oshawa, Hamilton and Kingston all boast median incomes noticeably higher than those in British Columbia CMAs. Moreover, in Vancouver and Abbotsford-Mission median incomes remain lower than the Canadian average, notwithstanding B.C.’s high housing costs and a period of fairly robust economic growth since 2012.

The bottom line is that B.C. has work to do to raise household incomes along with overall living standards. Policy-makers and business and community leaders need to redouble efforts to foster high-wage employment, scale-up more B.C. companies, retain and grow corporate head offices, accelerate productivity, and encourage innovation across the private and public sectors. Unless we up our game in these critical areas, median incomes — particularly relative to housing costs — will continue to look meager when judged against the most affluent Canadian cities.

Jock Finlayson is executive vice-president and chief policy officer with the Business Council of BC.

As published in PeopleTalk.