14th Annual Demographia International Housing Affordability Survey: 2018 Rating Middle-Income Housing Affordability Australia  Canada  China (Hong Kong) Ireland Japan  New Zealand  Singapore United Kingdom  United States Introduction by Felipe Carozzi, Paul Cheshire and Christian Hilber London School of Economics Data for 3rd Quarter 2017 14th Annual Demographia International Housing Affordability Survey INTRODUCTION Measuring Affordability: Alternative Perspectives Felipe Carozzi, Paul Cheshire & Christian Hilber London School of Economics Felipe Carozzi Paul Cheshire Christian Hilber Britain’s Office of National Statistics reported that houses were the most valuable asset in the UK at £5.5 trillion, accounting for 62% of the UK’s total net worth at the end of 2015: up from 48.7% 20 years previously. This compared to net asset values of Equity and Investment funds of a ‘mere’ £115billion.According to the Halifax the value of the UK housing stock had risen another £500billion to £6tn by November 2017, up from just over £4tn in 2007. No wonder the British – a country largely of homeowners – are obsessed with the asset value of housing while at the same time complaining about the real crisis of housing affordability. This is of course the first paradox of housing ‘affordability’: housing is both an asset and a good providing a flow of housing services – a place to live. The interests of house owners do not align with those of would be house owners. Rising house prices relative to incomes pit the old against the young and the rich against the poor. Before we can have useful debates or even give a balanced assessment of the issues we need good measures. Here Demographia has done wonders over the past decade to focus public debate on the inequity of rising house prices relative to incomes. As Oliver Hartwich in his Introduction to the 13th edition last year said “Demographia’s‘ median multiple’ approach…firmly established a benchmark for housing affordability by linking median house prices to median household incomes. It… is not a perfect measure because it does not account for house sizes or build quality. But it is the only index that allows a quick comparison of different housing markets, and it is the best approximation of housing affordability measures we have to date.” 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) a We agree. Apart from the median multiple being simple and useful, it is also the only measure out there for purposes of international comparison. The point of this introduction is to explore how it fares when we pull it about: using more precise definitions of what spatial housing markets might really be, accounting for differences in housing unit size and looking at the impact of housing affordability for households at different places in the overall distribution of incomes. We do this using data for Britain: the cradle of housing unaffordability and the originator of the ideas and mechanisms of planning which have contributed so much to the problem: Green Belts and planning by unpredictable political processes! What we do and what we find i) Replication Demographia did not originate the ‘median multiple’ (MM) as a measure of housing affordability but they have done great work popularising it. As academics, however, we believe in ‘replicability’. So, our first task was just to see if, using no more than the information about sources and methods in last year’s issue, we could replicate the 3rd Quarter 2016 MMs for the UK housing markets shown in the 13th Survey1. Our exact sample of transacted houses was not identical and our estimates of median household incomes are a bit different but the broad conclusion is that the replication was successful. The correlation between our estimated MMs and those reported by Demographia is 0.92. Both sets of MMs are shown in columns 3 and 4 of Table 1 and illustrated in the following figure. ii) Housing markets The next issue is ‘what is a housing market’. Elementary urban economics tells us that housing markets are spatially bounded and their extent is determined by the need to travel to jobs.Almost all house purchases are paid forout of incomes and to earn those incomes people must travel to work.So, housing markets are essentially coincident with broadly defined urban areas – Functional Urban Regions. Until very recently, although there were official definitions and data for such areas in the US, they were not defined in many other countries. Now – since 2014 – the OECD has defined such regions on a comparable international basis but provides only a limited set of data for them – not including house prices or even household incomes. As a result, while Demographia is able to use core-based urban regions for the US and a few other countries, it does not in Europe. Here they have had to use data for Eurostat’s official administrative regions. In Britain these are a mixture of Counties, Unitary Authorities and even Government Regions, such as Greater London. These, in economic terms, are a disparate group, seldom corresponding to actual housing markets, so our next step was to estimate MMs for areas more closely matching housing market areas. In Britain, there is a set of widely used Travel to Work In addition to the data referenced in Demographia’s 13th Edition we used: Annual Survey of Hours and Earnings (ASHE) and the Effects of Taxes and Benefits on Household Income dataset from Office for National Statistics to calculate median household income and income distributions.; National Statistics Postcode Lookup Centroids from Office for National Statistics to identify TTWAs; Domestic Energy Performance Certificate Register published by Department for Communities and Local Government to calculate house size and price per m2 in England and Wales; Policy paper tax and tax credit rates and thresholds for 2016-17 from HM Treasury to calculate after tax and national insurance household income. 1Sources: 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) b Areas(TTWA) that we take as functional urban areas here.2 We focus only on TTWAs that were located within the administrative regions used by Demographia and that had a significant town in them. We can see from Table 1 that while some Demographia ‘Housing Markets’ such as Aberdeen, Cardiff or Liverpool & Merseyside corresponded to just one TTWA, others such as Birmingham & West Midlands, covered several TTWAs and at the extreme, in ‘London Ex-urbs’, there are 12 TTWAs with MMs in our replications varying from 4.6 (Peterborough) to 7.8 (Brighton). These compare to our replication MMs for the corresponding Demographia market of 6.0. One should remember, however, that our TTWAs in the London Ex-urbs do not cover its whole area. Note: The figure illustrates our replication of the Demographia median multiples. The vertical axis represents the Demographia multiple as included in the 2016 report. The horizontal axis represents ourreplication multiple. The line corresponds to fitted values of a linear regression. The correlation between variables is 0.92. 2These are not strictly urban regions since the criterion used to define their boundaries is ‘self-containment’: 75%, of the employed population resident in them also work in them. Unlike urban regions therefore their extent necessarily covers the whole country and some may be quite rural: the Orkney Islands, for example, constitute a TTWA. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) c TABLE 1: ALL HOUSING MARKETS IN THE UK BY GEOGRAPHY Multiple (Median House Price/Median Household Income): 2016 – 3rd Quarter House Market Multiple 1 2 Demographia TTWA Aberdeen Aberdeen 3 4 5 Demographia Replication TTWA 4.551 4.318 4.744 Birmingham Birmingham & West Midlands Blackpool & Lancashire Bournemouth & Dorset Wolverhampton and Walsall Dudley 4.753 4.323 4.275 4.233 4.844 4.420 4.526 4.415 4.403 Blackpool 4.332 4.054 Preston 4.304 4.110 Lancaster and Morecambe 4.084 4.357 4.443 4.129 4.329 Burnley 2.750 2.676 Blackburn 3.633 3.371 Dorchester and Weymouth 6.453 5.893 Poole Cardiff 8.863 6.938 Derby Chesterfield 7.430 6.189 6.413 5.017 4.531 4.132 3.868 6.175 7.719 4.037 3.968 4.092 Dundee 4.076 3.666 3.744 Edinburgh Edinburgh 4.370 4.671 4.750 Falkirk Falkirk and Stirling 3.576 3.133 3.248 Glasgow Glasgow 4.043 3.845 3.502 Hull Hull & Humber 6.764 7.360 7.136 Dundee Leeds & West Yorkshire TTWA2 4.354 Bath Derby & Derbyshire Replication2 Coventry Bristol Cardiff 7 4.667 Bournemouth Bristol-Bath 6 7.240 6.368 6.661 7.129 4.680 4.094 4.035 3.963 4.213 4.086 4.277 4.328 4.010 4.103 Grimsby 4.057 3.908 Wakefield and Castleford 3.934 3.912 Leeds 3.826 3.837 Bradford 4.295 4.005 4.574 3.720 3.860 Leicester & Leicestershire Leicester 4.972 5.004 4.884 5.131 5.056 Liverpool & Merseyside Liverpool 5.055 3.677 3.763 3.638 3.655 London (Greater London Authority) London 8.494 8.328 8.163 9.185 8.773 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) d London Exurbs (E & SE England) Manchester & Greater Manchester Middlesbrough & Durham Peterborough 4.624 4.386 Luton 6.560 7.259 Southend 5.969 6.108 Medway 5.111 5.284 Milton Keynes 5.365 5.398 Brighton Portsmouth 7.054 6.014 7.788 4.971 8.621 6.084 4.978 Southampton 5.929 5.972 Isle of Wight 5.085 5.232 Bedford 5.462 5.346 Oxford 6.365 6.269 Cambridge 6.759 6.423 Manchester Durham and Bishop Auckland Middlesbrough and Stockton 4.462 4.132 4.130 3.599 4.306 3.410 4.260 4.357 4.560 3.026 3.244 4.020 Newcastle & Tyneside Newcastle 4.332 4.112 4.150 4.180 4.165 Newport Newport 4.620 4.346 4.213 3.846 3.865 5.080 5.036 Northampton Northampton & Northamptonshire Kettering and Wellingborough 5.171 Corby Nottingham & Nottinghamshire Perth Nottingham Mansfield Perth Plymouth & Devon Plymouth Exeter Doncaster 4.346 4.336 4.452 4.232 7.072 6.207 4.267 3.819 Stoke on Trent Stafford 4.410 4.114 3.998 4.636 4.159 4.294 3.829 4.408 5.233 6.336 5.087 5.867 6.020 4.080 Barnsley Stoke on Trent & Staffordshire 5.004 4.831 4.785 Sheffield Sheffield & South Yorkshire 4.559 3.675 4.387 4.016 3.567 3.408 4.843 4.431 3.728 4.659 3.417 3.877 4.454 4.350 Swansea Swansea 4.903 3.854 3.482 3.678 3.254 Swindon & Wiltshire Swindon 6.928 5.787 5.405 5.556 5.258 Telford & Shropshire Telford 5.810 5.636 4.879 5.176 4.412 5.110 5.072 5.551 5.586 Warrington & Cheshire Warwickshire Warrington and Wigan Chester Leamington Spa 3.718 4.755 6.901 3.721 4.866 4.609 5.287 6.301 Median Market 4.686 4.341 4.426 4.490 4.413 Note: Table reporting our replication of the Demographia MM (column 4), the calculation of MM for TTWAs (column 5), the MM after size adjustments as described in the text (column 6) and a column combining both TTWA and unit size adjustments (column 7). 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) e The basic conclusion of this exercise is that, as expected, administratively defined regions are very varying in their relationship to ‘real’ housing market areas and so can conceal a big range of affordability within them: about one quarter of the variance in TTWA MMs is not explained by regional level measures. iii) Does adjusting for the size of houses make a difference? Our initial thoughts were that once one controlled for their size, houses in the more expensive markets would be considerably less affordable than they appeared to be on the simple MM measure. The reasoning was that because they were more expensive relative to incomes, they would also be smaller, and simply measuring the median house price would not reflect that. Further thinking suggested, however, a countervailing force: while space might be more expensive, incomes are also generally higher in more expensive, larger cities, and research shows that people spend more on it as they get richer: they want bigger bedrooms for example and perhaps a spare one, possibly an additional bathroom.This might tend to make houses bigger where people are richer even though the unit cost of space may be higher. In fact, research estimating income elasticities of demand for housing space suggests that peoples’ spending on space in houses rises faster than incomes – if income increases by 10% spending on housing space increases by about 20%. Indeed, as one of us has frequently argued, this is one of the main drivers of increasing real house prices over time as incomes rise in the face of constraints on the space for houses imposed by restrictions on urban growth. These two forces might work against each other, therefore, meaning that adjusting for differences in house sizes might make only a small difference to affordability. The data on the price of space in houses is only available for England and Wales3 so in the columns of Table 1 showing the results, 6 and 7, we have had to exclude the Scottish markets. What we find is that whether we compare the Demographia Markets or the TTWAs we prefer, controlling for size makes not a lot of difference to measured affordability using the simple MM. The median house in Britain is very small – 83.9 m2: new houses are even smaller at 76m2. This compares to 137m2 in Denmark or 214m2 in the US, according to RIBA,so clearly you get a lot less house for your money in Britain than in Denmark or the US, but the difference in this across British markets is not so big. We would argue the most revealing comparison is between our ‘replication’ MM for the TTWA with the size adjusted TTWA MM. To estimate this we assume that all markets have the same median house size of 83.9m2. On this measure in the least affordable market – the London TTWA – affordability deteriorates from an MM of 8.2 to 8.8. In a low income and more affordable market such as Hull, TTWA affordability is almost the same on both measures while in one of the most affordable TTWAs in all of Britain – Burnley in Lancashire – affordability actually improves once the size of houses is taken into account. 3 Data on the area of houses is collected for purposes of estimating energy efficiency: for this reason, the measure of area used includes the area of garages associated with houses only if the garage is heated from the main central heating system of the house. The area is excluded if the garage is thermally separated from the house. The assessors told us that the great majority of garages (up to 95%) are not heated: so ignoring them makes little difference to the affordability measures we calculate. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) f So overall there seems to be evidence that adjusting for house sizes has some effect on estimated affordability across British markets, but it is not very large. The two measures are very closely related – the correlation is 0.98 – and while the regression coefficient is consistent with falling size-adjusted affordability as market affordability worsens, the effect is not statistically significant. The evidence within Britain indicates that adjusting for size has a smaller effect than might be first thought, and smaller than it seems to be internationally where house sizes vary very strongly. They tend to be bigger where they are more affordable. Even that is not a uniform effect, however: by international standards houses are big in both Australia and New Zealand but relatively unaffordable. iv) Affordability for the poor compared to the rich Finally, we turn to exploring differences in affordability for different income groups. Instead of using the median multiple method employed in Demographia, we now focus on the 10th, 25th, 75th and 90th percentiles of the income and house price distributions and re-calculate our multiples for these. In this way, we provide measures of affordability for selected groups at very different points in the income distribution, highlighting the distributional aspects of affordability problems. Our results for different percentiles are provided in Table 2. We observe a systematic difference across the income distribution with higher multiples – lower affordability – for relatively poor households. The average multiple for households in the lowest 25th percentile for example is about 5.5, but this improves to 4.5 for households in the top 25th percentile of the income distribution. Moreover, careful inspection of the table reveals that these differences are especially large in cities that are less affordable, such as London (10.3 vs. 7.8 for the bottom and top 25th percentiles respectively), and when we compare the extremes of the income distribution (e.g. highest decile versus lowest decile; for London it is 15.5 vs. 8.0). While these alternative estimates all exhibit high correlations with the Demographia multiples, they reveal a dimension of affordability and inequality that is masked by focusing only on medians. v.) Affordability before or after tax? Lastly, we note that Demographia’s MMs, like ours are based on gross rather than net (after-tax) incomes. In a final exercise (not shown in tables) we recalculated our multiple measures taking into account different income tax bands and rates and national insurance (NI) contributions. The findings are interesting. While we do not find much of a difference for the median multiples, the affordability gap narrows very markedly for top and bottom deciles, when tax and NI differences are accounted for. For example, while London’s bottom and top decile income groups have stark differences in pre-tax multiples of 15.5 vs 8.0, this narrows to 15.5 vs. 11.5 when taxes and NIcontributions are taken into account. For some of the least unaffordable cities the gap closes completely, or even reverses. For example, Liverpool and Merseyside have pre-tax top and bottom decile multiples of 5.0 and 3.9 respectively, the after-tax multiples are 5.0 vs. 5.1. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) g TABLE 2: ALL HOUSING MARKETS IN THE UK BY GEOGRAPHY Multiple (Median House Price/Median Household Income): 2016 – 3rd Quarter Housing Market House Price / Gross Income Top 10% Aberdeen Top 25% Median Bottom 25% 4.192 4.318 5.201 Bottom 10% Demographia 4.551 Birmingham & West Midlands 4.439 4.084 4.323 5.214 7.250 4.753 Blackpool & Lancashire 3.772 4.185 4.357 4.354 5.012 4.084 Bournemouth & Dorset 6.243 6.938 8.536 11.578 8.863 Bristol-Bath 6.593 6.413 7.997 12.132 6.189 Cardiff 4.007 4.531 5.761 3.769 3.868 4.796 Dundee 3.923 3.666 3.579 Edinburgh 4.780 4.671 5.135 7.688 4.370 Falkirk 3.310 3.133 3.202 4.039 3.576 Glasgow 3.858 3.845 3.953 4.770 4.043 Hull & Humber 3.937 4.328 5.197 7.013 4.277 Derby & Derbyshire 4.111 5.017 6.554 4.132 4.076 Leeds & West Yorkshire 4.079 3.870 3.837 4.252 5.745 3.826 Leicester & Leicestershire 4.237 4.727 5.004 6.199 7.564 4.972 Liverpool & Merseyside 3.851 3.435 3.677 3.806 5.044 5.055 London (Greater London Authority) 8.050 7.832 8.328 10.302 15.486 8.494 London Exurbs (E & SE England) 5.600 5.572 6.014 7.262 10.265 7.054 Manchester & Greater Manchester 4.375 4.079 4.132 4.739 6.422 4.462 Middlesbrough & Durham 3.994 3.691 3.599 3.470 3.914 4.130 Newcastle & Tyneside 3.902 4.112 4.799 5.613 4.332 Newport 4.085 4.346 4.926 4.620 Northampton & Northamptonshire 4.450 4.704 5.036 5.894 8.561 5.080 Nottingham & Nottinghamshire 3.831 4.323 4.336 4.787 6.893 4.346 4.079 4.232 4.564 5.604 4.452 Perth Plymouth & Devon 5.713 5.938 6.207 7.387 11.650 7.072 Sheffield & South Yorkshire 4.140 3.633 3.819 4.427 5.753 4.267 Stoke on Trent & Staffordshire 4.102 4.386 4.431 4.890 5.690 4.843 Swansea 3.466 3.854 4.357 6.024 4.903 Swindon & Wiltshire 5.439 5.787 7.145 11.293 6.928 Telford & Shropshire 5.139 5.636 7.212 9.833 5.810 Warrington & Cheshire 4.844 5.072 5.895 7.319 5.110 5.158 5.586 6.264 8.842 5.551 Warwickshire 5.201 Median Market 4.188 4.135 4.341 5.030 6.953 4.686 Note: Table reporting median multiples using our data sources for different quantiles of the unit price and income distributions as specified in the column headings. Demographia median multiples included in column 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) h Conclusions To sum up, our analysis for Britain revealed some interesting insights. Overall, we were able to replicate Demographia’s MMs for their definitions of regions pretty well. These figures however conceal a big range of affordability across housing markets within these regions. Perhaps surprisingly, taking account of the fact that the size of houses could vary substantially across housing markets, this makes little difference to our housing affordability measures suggesting that the demand for space keeps pace with house prices4. However, focusing on high and low-income groups within housing markets suggests, not surprisingly, that housing is most unaffordable for the lower income groups even though they buy cheaper houses. The relative affordability-gap is largest for the poorest groups in the least affordable cities. None of these calculations take account of taxes and benefits however: adjusting for these reduces the gap markedly for the least affordable cities and makes it essentially disappear for the more affordable ones. We hope future research will reveal whether the regularities we uncovered for Britain apply elsewhere. Overall however this exercise reinforces the judgement that Demographia does a very useful job. The simple MM measure has shortcomings. It does hide some significant differences in measured post and pre-tax affordability. We find that it is important to focus on actual urban housingmarkets rather than large administrative regions in which there can be a wide range of affordability on the MM measure. But overall all our adjustments yield values highly correlated with those found in Demographia and some of the obvious worries – for example about systematic difference in the size of houses between more and less affordable markets – make a lot less difference than might have been thought. Perhaps the Demographia multiples are “only” proxy measures of affordability, but our calculations indicate they really are pretty good proxies. Acknowledgement We would like to thank Xiaolun Yu for his terrific effort in collecting the data and merging huge data sets on street addresses or cross walks from administrative to functional regions. The authors are responsible for remaining mistakes. Biographical Information All authors are in the Department of Geography and Environment at the London School of Economics and are associates of the Centre for Economic Performance working on the Urban Programme. Felipe Carozzi is an Assistant Professor of Urban Economics and Economic Geography and Paul Cheshire & Christian Hilber are both Professors of Economic Geography. 4 This does not imply higher house prices do not make people worse off: rather that Londoners likely proportionately devote more of their incomes to housing. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) i Messages From the Authors From Wendell Cox: We are pleased that three of the world's leading housing market analysts, economists Felipe Carozzi, Paul Cheshire and Christian Hilber of the London School of Economics (LSE) have provided the Introduction to the 14th Annual Demographia International Housing Affordability Survey. Consistent with their substantial international work, they note that the need "good measures" of housing affordability. Moreover, their contribution is especially appropriate coming from Britain, which they characterize as "the cradle of housing unaffordability." The housing affordability crisis encompasses much more than housing. Housing is the largest expenditure item in the household budgets. For decades, housing costs rose at approximately the same rate as household incomes. That changed in many metropolitan areas (cities) after the adoption of urban containment, exported from Britain. Since then, house prices have doubled, tripled or even quadrupled relative to household incomes. This, of course, has increased the cost of living, which inevitably reduces the standard of living and increases poverty. This is evident in the United States where there is a strong negative correlation between the costliness of houses relative to incomes and the standard of living (Section 4) and where California has developed the highest poverty rated in the nation, due to its excessive land use regulation. This is also in contrast with cities liberal regulation remains. This is an important reversal. After millennia of poverty, the last two centuries have produced an unprecedented democratization of prosperity. Yet, this historic achievement is being withdrawn incrementallly in many cities. Rising wealth inequality is being substantially driven by government policy, not the vagaries of the market. This is a tragedy. And it is unnecessary. There is an urgent need to reform government policy to focus peope;s well-being. From Hugh Pavletich: My home country New Zealand is the global leader in dealing with political impediments, so that housing affordability is restored. The public conversation to restore housing affordability began in earnest early 2005, with the release of the 1st Annual Demographia International Housing Affordability Survey . Back in 2007, then Opposition Leader (now Sir) John Key made it clear within this interview that lack of land supply was the major problem. This has been a near 14 year process of evolutionary change, with the engagement of the public and responsible media. In turn this has pressured politicians to respond. Public opinion is the driver, as increasing numbers of New Zealanders better understand the true costs of unnecessary politically induced housing inflation to themselves and their wider families. The initial advocacy phase ran through to October 2012, with the major Government announcement to focus on land supply, infrastructure financing, process and construction costs. Over recent years broader consensus ( more ) has taken place. To illustrate further, just prior to Christmas 2017, Stephen Sellwood of Infrastructure New Zealand and Bill Evans of major builder Flatcher Livingrepeated again, that the focus must be on land supply and the appropriate debt financing of infrastructure. We are now moving to the implementation phase, with a recent change to a centre – left Labour led reformist government. Historically in New Zealand, Labour has been the political party of reform. More extensive information is available at my archival website Performance Urban Planning . Note in particular the Prime Minister Jacinda Ardern / Housing Minister Phil Twyford section near the top of the website, to better understand the new government's proposals to restore housing affordability. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) j Highlights from Previous Introductions to the Demographia International Housing Affordability Survey Oliver Hartwich, Executive Director. The New Zealand (#12: 2016) Senator Bob Day, AO, Senate of Australia (#12: 2016) Dr. Shlomo Angel, New York University (#11: 2015) We should not accept extreme price levels in our housing markets. High house prices are not a sign of city’s success but a sign of failure to deliver the housing that its citizens need. Fortunately, the media are waking up to the realisation that housing and land supply matters. The most powerful infographic of 2016 was produced by The Wall Street Journal. It showed what happened to house prices in US cities that had expanded their residential areas between 1980 and 2010 – and those that had not. As was to be expected, greater land supply went hand in hand with lower price increases. The distortion in the housing market… resulting from the supply-demand imbalance is enormous … and affects every other area of a country’s economy. New home owners pay a much higher percentage of their income on house payments than they should. However, the real culprit … was the refusal of … governments … to provide an adequate and affordable supply of land for new housing stock to meet demand. … the "scarcity" that drove up land prices is wholly contrived - it is a matter of political choice, not geographic reality. It is the product of restrictions imposed through planning regulation and zoning. We all understand what it means to prepare adequate lands for urban expansion, enough land to accommodate both residences and workplaces, so as to ensure that land—and particularly residential land—remains affordable for all. Unfortunately, municipalities of many rapidly growing cities often underestimate the amount of land needed to accommodate urban expansion. In the minority of cases where expansion is effectively contained by draconian laws, it typically results in land supply bottlenecks that render housing unaffordable to the great majority of residents. Alain Bertaud, New York University (#10: 2014) \ Hon. Bill English, Deputy Prime Minister, New Zealand Later Prime Minister (2016-2017) (#9: 2013) It is time for planners to abandon abstract objectives and to focus their efforts on two measurable outcomes that have always mattered since the growth of large cities during the 19th century’s industrial revolution: workers’ spatial mobility and housing affordability. As a city develops, nothing is more important than maintaining mobility and housing affordability. Mobility takes two forms: first, the ability to travel in less than an hour from one part of a city to another; and second, the ability to trade dwellings easily with low transactions costs. Housing affordability is complex in the detail – governments intervene in many ways – but is conceptually simple. It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) k Robert Bruegmann, PhD, University of Illinois, Chicago (#8: 2012) Joel Kotkin, Chapman University (#7: 2011) Dr. Tony Recsei, Save Our Suburbs, Sydney (#6: 2010) Dr. Shlomo Angel, New York University (#5: 2009) Dr. Donald Brash, Fomer Governor, Reserve Bank of New Zealand (#4: 2008) 2007: 3rd Edition … I think it is fair to say that a growing number of people who have looked at the figures have tended to agree that a good many well-meaning policies involving housing may be pushing up prices to such an extent that the negative side-effects are more harmful than the problems the policies were intended to correct. Although usually thought of as “progressive” in the English speaking world, the addiction to “smart growth” can more readily be seen as socially “regressive”. In contrast to the traditional policies of left of center governments that promoted the expansion of ownership and access to the suburban “dream” for the middle class, today regressive “progressives” actually advocate the closing off of such options for potential homeowners. During the 18th century, especially after the industrial revolution, rural dwellers desperate to make a living streamed into the cities, converting many areas into overcrowded slums. However, as the new economic order began to generate wealth, standards of living improved, allowing an increase in personal living space. Unless we are vigilant, high-density zealots will do their best to reverse centuries of gains and drive us back towards a Dickensian gloom. For cities to expand outward at their current pace ─ to accommodate their growing populations or the increased demand for space resulting from higher incomes ─ the supply of land must not be artificially constrained. The more stringent the restrictions, the less is the housing market able to respond to increased demand, and the more likely house prices are to increase. And when residential land is very difficult to come by, housing becomes unaffordable. ...the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land. Australia is perhaps the least densely populated major country in the world, but state governments there have contrived to drive land prices in major urban areas to very high levels, with the result that in that country housing in major state capitals has become severely unaffordable... 2006: 2nd Edition 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 2005: 1st Edition l TABLE OF CONTENTS Introduction: Measuring Affordability: Alternative Perspectives Felipe Carozzi, Paul Cheshire & Christian Hilber London School of Economics Messages from the Authors Highlights from Introductions to Previous Editions J k Executive Summary 1 1. Middle-Income Housing Affordability 4 1.1What is Middle-Income Housing Affordability 1.2 The Median Multiple: Measuring Housing Affordability 1.3 The Median Multiple: Historical & International Consistency 2. Housing Affordability in 2017: International Summary 2.1 Major Housing Markets 2.2 All Housing Markets 3. Housing Affordability in 2016: National Summaries 3.1 Australia 3.2 Canada 3.3 China 3.4 Ireland 3.5 Japan 3.6 New Zealand 3.7 Singapore 3.8 United Kingdom 3.9 United States a 5 5 6 8 8 11 12 13 14 17 18 18 19 20 23 24 4. Housing Affordability: Determining the Standard of Living 27 Schedule 1: Major Housing Markets Ranked by Affordability 35 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) m Schedule 2: All Housing Markets Ranked by Affordability Schedule 3: All Housing Markets Ranked by Nation 36 40 Annex: Uses, Methods and Sources 46 Author Biographies 51 FIGURES 1. Housing Affordability: Largest Markets 2. House Price to Income Ratios 3: Housing Affordability: 2004-2017 4: Housing Affordability & Land Regulation 5: National Housing Affordability 6: Middle-Income Housing Affordability: Australia 7: Middle-Income Housing Affordability: Canada 8: Share of Pre-Tax Income Required: Vancouver and Toronto 9: Middle-Income Affordability History: Canada 10: Middle-Income Housing Affordability: New Zealand 11: Median House Price to Median Earnings Ratio: England and Regions 11: Largest United States Markets 12: California & the United States Compared 13: Impact of Housing on the Cost of Living 14: Impact of Regulation on Land Price 15: Urban Fringe Prohibitions & Land Prices 4 8 9 11 12 13 15 17 17 19 23 24 25 28 29 30 TABLES ES-1 Demographia Housing Affordability Ratings ES-2: Housing Affordability by Nation: Major Housing Markets ES-3 Housing Affordability by Nation: All Housing Markets 1 2 3 1: Demographia Housing Affordability Ratings 2: Liberal Regulation v. Urban Containment: Land Use Regulation Classifications 3: Housing Affordability by Nation: Major Housing Markets 4: Affordable Major Housing Markets 5: Severely Unaffordable Major Housing Markets 6 7 9 10 10 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) n 6: All Housing Markets: 10 Most Affordable 7: All Housing Markets: 10 Least Affordable 8: Housing Affordability Ratings by Nation: All Housing Markets 9: New House Affordability in Singapore 10: Affordable Housing Markets: Definition 11: Housing Market Selection Criteria 11 11 12 22 30 49 Permission granted to quote with attribution. Permission granted for links to this report http://www.demographia.com/dhi.pdf Permission granted for links to the websites http://www.demographia.com/ http://www.performanceurbanplanning.org/ 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) o 14th Annual Demographia International Housing Affordability Survey Rating Middle-Income Housing Affordability (2018 Edition: Data from 3rd Quarter 2017) By Wendell Cox (Demographia) & Hugh Pavletich (Performance Urban Planning) EXECUTIVE SUMMARY T he 14th Annual Demographia International Housing Affordability Survey covers 293 metropolitan housing markets (metropolitan areas) in nine countries (Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States) for the third quarter of 2017. A total of 92 major metropolitan markets (housing markets) --- with more than 1,000,000 population --- are included, including five megacities, which are defined as having more than 10,000,000 residents (Tokyo-Yokohama, New York, Osaka-Kobe-Kyoto, Los Angeles, and London). Middle-Income Housing Affordability The Demographia International Housing Affordability Survey rates middle-income housing affordability using the “Median Multiple,” which is the median house price divided by the median household income. The Median Multiple is widely used for evaluating urban markets, and has been recommended by the World Bank and the United Nations and is used by the Joint Center for Housing Studies, Harvard University. The Median Multiple and other price-to-income multiples (housing affordability multiples) are used to Table ES-1 compare housing affordability between Demographia International Housing Affordability Survey markets by the Organization for Economic Housing Affordability Ratings Cooperation and Development, the Housing Affordability Rating Median Multiple International Monetary Fund, The Economist, Affordable 3.0 & Under and other organizations. Moderately Unaffordable 3.1 to 4.0 Seriously Unaffordable 4.1 to 5.0 Severely Unaffordable 5.1 & Over Median multiple: Median house price divided by median household income Historically, liberally regulated markets have exhibited median house prices that are three times or less that of median household incomes, for a Median Multiple of 3.0 or less. Demographia uses the housing affordability ratings in Table ES-1. Housing Affordability in 2017 There are 10 affordable major housing markets, all in the United States. There are 28 severely unaffordable major housing markets, including all in Australia (5), New Zealand (1) and China (1). 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 1 Thirteen of the major markets in the United States are severely unaffordable (out of 54), six in the United Kingdom (out of 21 major markets) and two out of Canada’s six. The most affordable major housing markets are in the United States, with a moderately unaffordable Median Multiple of 3.8, followed by Japan (4.2), Canada and the United Kingdom (4.3), Singapore and Ireland both have Median Multiples of 4.8. Overall, the major housing markets of Australia (6.6), New Zealand (8.8) and China (19.4) are severely unaffordable.(Table ES-2). There are 10 affordable major housing markets, all in the United States. Rochester is the most affordable, with a Median Multiple of 2.5, followed by Cincinnati and Cleveland (2.7), Oklahoma City, Pittsburgh and Buffalo (2.8), St. Louis and Detroit (2.9) as well as Indianapolis and Grand Rapids (3.0). There are 26 severely unaffordable major housing markets in 2017. Again, Hong Kong is the least affordable, with a Median Multiple of 19.4 up from 18.1 last year. Sydney is again second, at 12.9. Vancouver is third least affordable, at 12.6, followed by San Jose, with a Median Multiple of 10.3 and Melbourne, with a Median Multiple of 9.9. The least affordable 10 also includes Los Angeles (9.4), Honolulu (9.2), San Francisco (9.1), Auckland (8.8) and London (8.5). Schedule 1 includes Median Multiples for all major markets. Table ES-2 Housing Affordability Ratings by Nation: Major Housing Markets (Over 1,000,000 Population) Affordable Moderately Seriously Severely (3.0 & Unaffordable Unaffordable Unaffordable Median Total Under) Nation (3.1-4.0) (4.1-5.0) (5.1 & Over) Market Australia 0 0 0 5 5 6.6 Canada 0 2 2 2 6 4.3 China: Hong Kong 0 0 0 1 1 19.4 Ireland 0 0 1 0 1 4.8 Japan 0 1 1 0 2 4.2 New Zealand 0 0 0 1 1 8.8 Singapore 0 0 1 0 1 4.8 United Kingdom 0 1 14 6 21 4.6 United States 10 20 11 13 54 3.8 TOTAL 10 24 30 28 92 4.2 Table ES-3 summarizes housing affordability in all markets. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 2 Nation Australia Canada China (Hong Kong) Ireland Japan New Zealand Singapore United Kingdom United States TOTAL Table ES-3 Housing Affordability Ratings by Nation: All Markets Affordable Moderately Seriously Severely (3.0 & Unaffordable Unaffordable Unaffordable Under) (3.1-4.0) (4.1-5.0) (5.1 & Over) 0 2 5 15 11 15 6 14 0 0 0 1 2 2 1 0 0 1 1 0 0 0 2 6 0 0 1 0 0 5 18 10 49 59 37 30 62 84 71 76 Total 22 46 1 5 2 8 1 33 175 293 Median Market 5.9 3.9 19.4 3.7 4.2 5.8 4.8 4.5 3.7 4.1 Housing Affordability and the Standard of Living Fundamentally, differences in housing affordability can virtually translate into similar differences in the standard of living. Worsening housing affordability and the resultant standard of living declines threaten one of the greatest recent human advances – the democratization of prosperity. Virtually all the severely unaffordable major housing markets covered in the Demographia International Housing Affordability Survey have restrictive land use regulation, usually urban containment policy. Urban containment seeks to severely limit new housing development on and beyond the urban fringe or even outright prohibition. A typical strategy is to impose an "urban growth boundary" which is associated with higher land prices for land on which development is allowed. This leads to higher house prices, a lower standard of living and increased poverty and a important need for reform. There are signs of progress, most recently in New Zealand. New Zealand's new government has plans to directly attack the element of urban containment policy most associated with that country's spiraling house prices. For 50 years, Singapore has achieved remarkable success from its policies that have made housing affordability a principal priority. In her legendary book, The Life and Death of Great American Cities, Jane Jacobs said "...a metropolitan economy, if it is working well, is constantly transforming many poor people into middle-class people..." In her last interview, she said that "If planning helps people, they ought to be better off as a result, not worse off. Yet, urban containment policy has been associated with more expensive housing, which has lowered the standard of living, increased poverty and stunted economic growth. The focus of public policy, including planning, should be on people, rather than place. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 3 14th Annual Demographia International Housing Affordability Survey Rating Middle-Income Housing Affordability (2018 Edition: Data from 3rd Quarter 2017) By Wendell Cox (Demographia) & Hugh Pavletich (Performance Urban Planning) 1: MIDDLE-INCOME HOUSING AFFORDABILITY T he 14th Annual Demographia International Housing Affordability Survey measures middle-income housing affordability in 92 major metropolitan housing markets1 in Australia, Canada, Hong Kong, Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States. These include five megacities,2 which are among the largest metropolitan areas in the world --Tokyo-Yokohama, New York, Osaka-Kobe-Kyoto, Los Angeles, and London.3 Overall, 18 of the major markets have more than 5,000,000 residents, with an overall Median Multiple of 4.8 (Figure 1). Housing Affordability: Largest Markets In total, the 14th Annual Demographia International 2017: POPULATION OVER 5,000,000 Housing Affordability Survey provides ratings for Hong Kong Sydney, NSW 293 housing markets located in the same nine Los Angeles, CA London (GLA) geographies, with data from the third quarter Toronto, ON London Exurbs (September quarter) of 2017. The Survey Miami, FL New York, NY-NJ-PA provides perhaps the largest collection of Singapore housing affordability data at the housing market Washington,Tokyo-Yokohama Median Multiple DC-VA-MD-WV Dallas-Fort Worth, TX Median House Price level in the world. House price data is obtained Chicago, IL Divided by Median Houston, TX Household Income or estimated from sources that account for the Philadelphia, PA-NJ-DE-MD Osaka-Kobe-Kyoto majority of existing dwellings sold in each of Atlanta, GA the geographies. The data is reported at the 0 5 10 15 20 Median Multiple housing market level, unmasking significant Figure 1 differences in housing affordability within nations.4 The Demographia International Housing Affordability Survey focuses on middle-income housing affordability. Middle-income housing affordability is different from low – income "affordable' housing," which requires subsidies.5 However, this does not suggest that low-income affordable housing is less important. The requirement for low-income affordable housing in a market is 1 Metropolitan areas with more than 1,000,000 population. Metropolitan areas with more than 10 million population. 3 Metropolitan areas are labor markets and housing markets. 4 This is most evident in the United States, where there are many affordable housing markets and many severely unaffordable markets. 5 Including social housing. 2 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 4 determined by its middle-income housing affordability, which is the focus of the Survey. If middleincome housing is affordable, then more low-income households will be able to afford unsubsidized housing (Section 4). Middle-income housing affordability is different than luxury housing affordability, which is reported upon by a number of organizations (such as the Knight The requirement for low-income Frank's Wealth Report). In the vernacular of this populist era, affordable housing in a market middle-income housing affordability might be characterized is determined by its middleas relating to the "99 percent," rather than the luxury "one income housing affordability percent" of the market. 1.1: What is Middle-Income Housing Affordability? Housing affordability is measured by comparison of house prices to household incomes.6 According to the United Nations,7 “If there is a single indicator that conveys the greatest amount of information on the overall performance of housing markets, it is the house price-to-income ratio.” The Demographia International Housing Affordability Survey, measures middle-income housing affordability in housing markets, or metropolitan area (labor markets), which is the economic (or functional) dimension of cities.8 Entire housing markets are used, rather than neighborhoods or parts of housing markets, because they represent the selection of housing that is locally available to households and from which businesses draw their employees. Housing affordability is evaluated on two overall market levels, between housing markets (such as between Adelaide and Melbourne) and over time within the same housing market (such as Adelaide from 1980 to 2015). 1.2: The Median Multiple: Measuring Housing Affordability Analyses of housing affordability must examine house prices in the context of incomes. 6 See, for example, Jason Furman, Barriers to Shared Growth: The Case of Land Use Regulation and Economic Rents, Address to the Urban Institute, November 20, 2016. https://obamawhitehouse.archives.gov/sites/default/files/page/files/20151120_barriers_shared_growth_land_use_regulation_and_ economic_rents.pdf 7 Shlomo Angel, Stephen K. Mayo and William L. Stephens, Jr., “The Housing Indicators Program: A Report on Progress and Plans for the Future,” Netherlands Journal of Housing and the Built Environment 8, no. 1 (1993): 13-48. http://sollyangel.com/wp-content/uploads/2013/10/38.-1993-The-Housing-Indicators-Program.pdf. 8 The physical dimension of cities is the built-up urban area, which is surrounded by rural territory (see Demographia World Urban Areas (see: http://demographia.com/db-worldua.pdf). These definitions exclude the administrative unit or “municipality,” which is simply a political construct that may be smaller than the metropolitan area (generally in the West) or larger (such as in China). For further information see: Paul Cheshire, Max Nathan and Henry G. Overman of the London School of Economics in their recent book, Urban Economics and Urban Policy: Challenging Conventional Policy Wisdom 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 5 The Demographia International Housing Affordability Survey uses the “Median Multiple” (median house price divided by gross pre-tax annual median household income9) to assess housing affordability. The Median Multiple is a house price to Table 1 income ratio that is widely used for Demographia International Housing Affordability Survey evaluating urban markets, and has been Housing Affordability Ratings recommended by the World Bank10 and Housing Affordability Rating Median Multiple Affordable 3.0 & Under the United Nations and is used by the Moderately Unaffordable 3.1 to 4.0 Joint Center for Housing Studies, Harvard 11 Seriously Unaffordable 4.1 to 5.0 University. Similar house price to Severely Unaffordable 5.1 & Over income ratios (housing affordability Median multiple: Median house price divided by median multiples) are used to compare housing household income affordability between markets by the Organization for Economic Cooperation and Development, the International Monetary Fund, international credit rating services, media outlets (such as The Economist12) and others. More elaborate indicators, which often mix housing Historically, the Median Multiple has affordability and mortgage affordability can mask the been remarkably similar … with structural elements of house pricing and are often not median house prices from 2.0 to 3.0 well understood outside the financial sector. The times median household incomes. mixed indicators provide only a "snapshot," because interest rates can vary over the term of a mortgage; however the price paid for the house does not. The Median Multiple is a reliable, easily understood and essential structural indicator for measuring the health of residential markets and facilitates meaningful and transparent comparisons of housing affordability. Further to this, the Median Multiple provides a solid foundation for the consideration of structural policy options for restoring and Typically, severely unaffordable maintaining housing affordability in local housing markets have urban containment markets. The Demographia International Housing land use policy. Affordability Survey housing affordability ratings are shown in Table 1. 1.3: The Median Multiple: Historical & International Consistency Available data shows that house costs have generally risen at a rate similar to that of household incomes until comparatively recently. This is consistent with cost trends among other basic necessities, such as personal transport, food and clothing, which in some cases have even declined. 9 This is to be contrasted with median "family" income. The Housing Indicators Program, http://siteresources.worldbank.org/INTURBANDEVELOPMENT/Resources/3363871169578899171/rd-hs7.htm. Also see Shlomo Angel, Housing Policy Matters: A Global Analysis. Oxford University Press, 2000. 11Indicators of Sustainable Development: House Price-to-income Ratio: http://esl.jrc.it/envind/un_meths/UN_ME050.htm. 12 For example, The Economist publishes a housing affordability index for metropolitan areas in China (see Section 4). 10 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 6 Table 2 LIBERAL V. URBAN CONTAINMENT: LAND USE REGULATION CLASSIFICATIONS The Demographia International Housing Affordability Survey uses the following land use regulation classifications: Liberal Land Use Policy (Less Restrictive Markets) applies in markets not classified as having more restrictive land use regulation (where competitive land markets are permitted to operate on the urban fringe). In these markets, residential development is allowed to occur based upon consumer preferences, subject to basic environmental regulation.13 Generally, liberal land use regulation is “demanddriven” Land is allowed to be developed, except in limited areas, such as parks and environmentally sensitive areas. By allowing development on the urban fringe, liberal land use regulation allows the "supply vent" to operate, which keeps house prices affordable. Less restrictive regulation can also be called traditional or liberal regulation. In addition to lower housing costs relative to incomes, the lower population densities typical of liberal markets are associated with less intense traffic congestion and shorter average work trip journey times. Liberal land use regulation has also been called “traditional” regulation. Urban Containment Policy (More Restrictive Markets) uses urban containment14 or other mechanisms (such as comprehensive plans or development limits) to such an extent that the competitive market for land is not permitted to operate on the urban fringe. More restrictive land use regulation seeks to outlaw the liberal regulation that produced middle-income housing affordability. Urban containment are the most important of more restrictive land use regulation. Generally, urban containment regulation is “plan-driven,” as planning departments and governments determine where new housing is allowed to be built. There is a "negative presumption," with new development generally prohibited, except in limited areas where it is permitted by government plans. Typically, urban containment policies include urban containment boundaries and related variations (such as urban growth boundaries, green belts, urban service districts, “growth areas” and other strategies that substantially reduce the amount of land available for house building. Urban containment policy may also be characterized by terms such as "densification policy," “compact development”, “urban consolidation”, “growth management” “and "smart growth.” By severely limiting or even prohibiting development on the urban fringe, urban containment eliminates the "supply vent" of urban fringe development, by not allowing the supply of housing to keep up with demand, except at prices elevated well above historic norms. Urban containment policies are often accompanied by costly development impact fee regimes that disproportionately charge the cost of the necessary infrastructure for growth on new house buyers. There is particular concern about the cost increasing impacts of these fees and levies, especially in Australia, Canada (Canada Mortgage and Housing Corporation), New Zealand (New Zealand Productivity Commission) and California. Classification of Major Markets: The classification of major markets (metropolitan areas with more than 1,000,000 population) is described in the Annex and in Figure 4. Historically, the Median Multiple has been remarkably similar among six surveyed nations, with median house prices from 2.0 to 3.0 times median household incomes (Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States). Housing affordability remained generally within this range until the late 1980s or late 1990s in each of these nations (Figure 2).15 In recent decades, house prices have escalated far above household incomes in many parts of the world. The Demographia International Housing Affordability Survey has been published for 14 years to highlight this 13 Liberal land use policy may vary widely, from the near deregulation in some areas of Texas to the "light-handed" zoning regulations operating throughout much of the rest of the United States. 14 Called urban consolidation in Australia. 15 Anthony Richards, Some Observations on the Cost of Housing in Australia, Address to 2008 Economic and Social Outlook Conference The Melbourne Institute, 27 March 2008 http://www.rba.gov.au/speeches/2008/sp-so-270308.html. This research included all nations covered in the Demographia International Housing Affordability Survey except for Ireland. The Richards research is also illustrated in the of the National Housing Council of Australia, http://www.fahcsia.gov.au/sa/housing/pubs/housing/national_housing_supply/Documents/default.htm (Figure 1.1). 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 7 trend and its consequences. In some metropolitan markets house prices have doubled, tripled or even quadrupled relative to household incomes. Typically, the housing markets rated "severely unaffordable" have more restrictive land use policy, usually "urban containment" (Table 2). Median Multiples of 3.0 or less continue to be observed in some markets of the United States, Canada and Ireland.16 Definitive historical data has not been identified for Hong Kong, Japan or Singapore. The Demographia International Housing Affordability Survey has been published for 14 years to emphasize the importance of well functioning housing markets. The huge disparities in housing affordability between metropolitan markets are strongly correlated with cost of living and standard of living differences. Success in achieving higher standards of living and lower poverty rates, a principal domestic policy priority of virtually all governments, requires attention to housing affordability (Section 4). House Price to Income Ratios FROM 1987 Adapted from Reserve Bank of Australia, Courtesy Frontier Centre for Public Policy Figure 2 2: HOUSING AFFORDABILITY IN 2017: INTERNATIONAL SUMMARY T he 14th Annual Demographia International Housing Affordability Survey provides housing affordability ratings for 92 major housing markets (over 1,000,000 population) and an overall total of 293 markets. Markets in 9 nations are rated. 2.1: Major Housing Markets There was a reduction in the number of affordable major housing markets from 11 to 10 in 2017. At the same time, the number of severely unaffordable major housing markets dropped from 29 to 28. Five of the markets rated by the UBS Global Real Estate Bubble Index with the greatest bubble risk are also rated in the 14th Annual Demographia International Housing Affordability Survey, each as severely unaffordable markets. This includes Toronto, Vancouver, Sydney, London and Hong Kong. Major market data is summarized in Schedule 1, with additional information in Schedule 3. For the fifth year in a row, the United States has the most affordable housing among major housing markets, a moderately unaffordable Median Multiple of 3.8. Japan has an Average Multiple of 4.2, Canada (4.3) the United Kingdom (4.5), Singapore (4.8) and Ireland (4.8) have seriously unaffordable housing. 16 A value below 2.0 is affordable, but may indicate depressed economic conditions. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 8 Three national markets are severely unaffordable, with Median Multiples of 5.1 or above. These include China (Hong Kong), with a Median Multiple of 19.4, New Zealand, at 8.8 and Australia at 6.6. The trend in annual major housing market Median Multiples are shown in Figure 3. Ireland, Japan and Singapore are the only nations with no severely unaffordable major housing markets in this year's Survey (Table 3). Table 3 Housing Affordability Ratings by Nation: Major Housing Markets (Over 1,000,000 Population) Affordable Moderately Seriously Severely (3.0 & Unaffordable Unaffordable Unaffordable Median Total Under) Nation (3.1-4.0) (4.1-5.0) (5.1 & Over) Market Australia 0 0 0 5 5 6.6 Canada 0 2 2 2 6 4.3 China: Hong Kong 0 0 0 1 1 19.4 Ireland 0 0 1 0 1 4.8 Japan 0 1 1 0 2 4.2 New Zealand 0 0 0 1 1 8.8 Singapore 0 0 1 0 1 4.8 United Kingdom 0 1 14 6 21 4.6 United States 10 20 11 13 54 3.8 TOTAL 10 24 30 28 92 4.2 Median Multiple: Median Market Most Affordable Major Housing Markets: Housing Affordability: 2004-2017 The 10 affordable major housing markets are all MAJOR MARKETS (OVER 1,000,000 POPULATION) in the United States (Table 4). Rochester is the 18 most affordable, with a Median Multiple of 2.5. 15 Australia Cincinnati and Cleveland have a Median Canada Multiple of 2.7. Buffalo, Oklahoma City and China (Hong Kong) 12 Ireland Pittsburgh have a Median Multiple of 2.8, Japan 9 Detroit and St. Louis have a Median Multiple of New Zealand Singapore 2.9, while Grand Rapids and Indianapolis have 6 United Kingdom a Median Multiple of 3.0, while Buffalo ranks United States 3 second with a Median Multiple of 2.6. There is 0 a three-way tie for third most affordable 2004 2006 2008 2010 2012 2014 2016 between Cincinnati, Cleveland and Pittsburgh, Figure 3 with Median Multiples of 2.7. Oklahoma City and St. Louis have Median Multiples of 2.9. Four major housing markets have affordable Median Multiples of 3.0, Detroit, Grand Rapids, Indianapolis and Kansas City. These affordable markets have liberal land use regulation (Table 2, above). Least Affordable Major Housing Markets: The severely unaffordable major markets include all in Australia (5), New Zealand (1) and China (1). Two of Canada’s six markets are severely unaffordable. Six of the 21 major markets in the United Kingdom are severely unaffordable, and 13 of the 54 markets in the United States. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 9 The 10 least affordable major housing markets are shown in Table 7. Hong Kong has least affordable housing, with a Median Multiple of 19.4, the least affordable Median Multiple yet recorded. For the eighth year in a row, Hong Kong has had the worst housing affordability in the Demographia International Housing Affordability Survey. Rank 1 2 2 4 4 4 7 7 9 9 Table 4 Affordable Major Housing Markets Nation U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Metropolitan Market Rochester, NY Cincinnati, OH-KY-IN Cleveland, OH Buffalo, NY Oklahoma City, OK Pittsburgh, PA Detroit, MI Saint Louis, MO-IL Grand Rapids, MI Indianapolis, IN Median Multiple 2.6 2.7 2.7 2.8 2.8 2.8 2.9 2.9 3.0 3.0 Sydney is again the second least affordable market, with a 12.9 Median Multiple, the highest ever recorded outside Hong Kong in the Demographia International Housing Affordability Survey. Vancouver remains the third least affordable major housing market, with a Median Multiple of 12.6. The least affordable 10 in major market housing affordability is rounded out by San Jose (10.3), Melbourne (9.9), Los Angeles (9.4), Honolulu (9.3), San Francisco (9.1) Auckland (8.8)17 The severely unaffordable major housing markets are shown in Table 5. Hong Kong is the least affordable market for the 8th consecutive year Table 5 Severely Unaffordable Major Housing Markets (Least Affordable) Rank 65 66 67 67 69 69 69 72 72 74 75 76 77 78 Nation U.K. U.S. U.S. U.S. U.S. U.S. U.S. Australia U.S. U.K. Australia U.S. Australia U.K. Metropolitan Market Leicester & Leicestershire Sacramento, CA Boston, MA-NH Portland, OR-WA Denver, CO New York, NY-NJ-PA Riverside-San Bernardino, CA Perth, WA Seattle, WA Plymouth & Devon Brisbane, QLD Miami, FL Adelaide, SA Bristol-Bath Median Multiple 5.2 5.3 5.5 5.5 5.7 5.7 5.7 5.9 5.9 6.1 6.3 6.5 6.6 6.8 Rank 79 80 81 82 83 84 85 86 87 88 89 90 91 92 Nation U.K. U.K. Canada U.S. U.K. N.Z. U.S. U.S. U.S. Australia U.S. Canada Australia China Metropolitan Market London Exurbs (E & SE England) Bournemouth & Dorsett Toronto, ON San Diego, CA London (Greater London Authority) Auckland San Francisco, CA Honolulu, HI Los Angeles, CA Melbourne, VIC San Jose, CA Vancouver, BC Sydney, NSW Hong Kong Median Multiple 6.9 7.3 7.9 8.4 8.5 8.8 9.1 9.2 9.4 9.9 10.3 12.6 12.9 19.4 The housing affordability performance and general regulatory structure (urban containment or equivalent versus liberal land use policy) is illustrated for the largest markets in Figure 4. 17 Auckland's lower Median Multiple in 2017 is principally due to a restatement of median household incomes by Statistics New Zealand. See Section 3.6. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 10 2.2: All Housing Markets Among the 293 markets, Ireland and the United States have the most affordable housing with a national Median Multiples of Housing Affordability & Land Regulation 3.7 (moderately 2+ MILLION METROPOLITAN AREAS: 2017 unaffordable). Canada is third at 3.9 and is followed by Japan, which at 4.1 has a seriously unaffordable rating. The United Kingdom (4.5) and Singapore (4.8) are rated seriously unaffordable. The least affordable markets are Less Restrictive Land Use China (Hong Kong), at 19.4, Regulation (Generally Liberal) Australia (6.3) and New More Restrictive Land Use Zealand (5.8), each severely Regulation (Generally Urban unaffordable (Figure 5). Containment) Hong Kong Sydney Vancouver Melbourne Los Angeles San Francisco London (GLA) San Diego Toronto London Exurbs Miami Brisbane Seattle New York Riverside-SB Denver Portland Boston Sacramento Birmingham (UK) Singapore Tokyo Las Vegas Manchester Orlando Montreal Tampa-STP Leeds Washington Phoenix Austin Charlotte San Antonio Chicago Dallas-FTW Philadelphia Houston Osaka-K-K Baltimore Minneapolis-STP Atlanta Columbus Detroit St. Louis Pittsburgh Cincinnati Cleveland Among all markets, 63 are affordable (Median Multiple 0 of 3.0 or less). There are 84 moderately unaffordable markets (Median Multiple of 3.1 to 4.0) and 71 seriously unaffordable markets (Median Multiple of 4.1 to 5.0). A total of 76 markets are severely unaffordable, with a Median Multiple of 5.1 or higher. All 293 housing markets are ranked by housing affordability in Schedule 2 and listed alphabetically in Schedule 3. The 63 affordable markets (having a Median Multiple of 3.0 or below) are in Ireland (3), Canada (11) and the United States (49). There are no affordable markets in Australia, China (Hong Kong), Japan, New Zealand, Singapore or the United Kingdom (though such affordability was typical of virtually all markets before). Due to four way tie for tenth most affordable, the top 10 markets includes 13 entries. Canada has the most entries in the Figure 4 MEDIAN MULTIPLE 3 Rank 1 2 2 4 4 4 4 8 8 10 10 10 10 Rank 283 283 285 286 286 288 289 290 291 292 293 6 9 12 15 Nation U.S. Canada U.S. Canada Canada Ireland U.S. Canada U.S. U.S. U.S. U.S. U.S. Metropolitan Market Youngstown, OH-PA Moncton, NB Utica, NY Fort McMurray, AB Fredericton, NB Limerick Peoria, IL Saint John, NB Scranton-Wilkes Barre, PA Cedar Rapids, IA Davenport, IA-IL Rockford, IL Syracuse, NY Table 6 All Housing Markets: 10 Most Affordable 18 21 Median Multiple 1.9 2.1 2.1 2.2 2.2 2.2 2.2 2.3 2.3 2.4 2.4 2.4 2.4 Table 7 All Housing Markets: 10 Least Affordable Nation U.S. U.S. U.S. U.S. U.S. Australia U.S. U.S. Canada Australia China Metropolitan Market Salinas-Monterey, CA San Francisco, CA Honolulu, HI Los Angeles, CA Santa Barbara, CA Melbourne, VIC San Jose, CA Santa Cruz, CA Vancouver, BC Sydney, NSW Hong Kong 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) Median Multiple 9.1 9.1 9.2 9.4 9.4 9.9 10.3 10.4 12.6 12.9 19.4 11 Median Multiple top nine, with five, the most affordable of which is Moncton (NB), at 2.1 The United States has eight entries in the top 13, with Youngstown, Ohio the most affordable, at 1.9, while Utica, National Housing Affordability: 2017 New York is tied with Moncton for second ALL 293 MARKETS 20 most affordable. Ireland's Limerick is tied with 18 three other housing markets for the fourth most Median Multiple 16 Median House Price affordable position, at 2.2, joined by Canada's Divided by Median 14 Household Income Fort McMurray, Alberta, and Fredericton, New 12 10 Brunswick and Peoria, Illinois in the United 8 States (Table 6). Among the 76 severely unaffordable markets, 30 are in the United States, 16 in Australia, 15 in Canada, 10 in the United Kingdom, seven in Canada, six in New Zealand and one in China. 6 4 2 0 Australia Canada HK Ireland Japan NZ Singapore UK US Figure 5 Among the 10 least affordable housing markets, seven are major housing markets. The least affordable 10 also includes Santa Cruz (10.4) in the San Francisco Bay area as well as Santa Barbara, California at 9.4 and Salinas-Monterey, at 9.1 (Table 7). Table 8 summarizes housing affordability ratings by nation for all 293 markets. Nation Australia Canada China (Hong Kong) Ireland Japan New Zealand Singapore United Kingdom United States TOTAL Table 8 Housing Affordability Ratings by Nation: All Markets Affordable Moderately Seriously Severely (3.0 & Unaffordable Unaffordable Unaffordable Under) (3.1-4.0) (4.1-5.0) (5.1 & Over) 0 2 5 15 11 15 6 14 0 0 0 1 2 2 1 0 0 1 1 0 0 0 2 6 0 0 1 0 0 5 18 10 49 59 37 30 62 84 71 76 Total 22 46 1 5 2 8 1 33 175 293 Median Market 5.9 3.9 19.4 3.7 4.2 5.8 4.8 4.5 3.7 4.1 3: HOUSING AFFORDABILITY IN 2017: NATIONAL SUMMARIES T he housing affordability situation is summarized by nation below. The housing affordability data for each housing market is ranked in Schedule 1 for the major markets and Schedule 2 for all markets. Schedule 3 lists all markets, alphabetically, with additional data. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 12 3.1: Australia Again, as in each of the previous 13 Demographia International Housing Affordability Surveys all of Australia's five major housing markets are severely unaffordable (Figure 6)18 The overall major housing market Median Multiple is a severely unaffordable 6.6 and is less affordable than all major markets except for Hong Kong. Major Markets: Sydney is again Australia’s least Sydney is again the second least affordable market, with a Median Multiple of 12.9, affordable market, with a 12.9 Median and ranks second worst overall, trailing Hong Multiple, the highest ever recorded Kong. In 2001, Sydney’s Median Multiple was 6.3 outside Hong Kong and has since deteriorated by the equivalent of 6.6 years in pre-tax median household income (more than doubling). This is 4.5 times the rate of housing affordability deterioration between 1981 and 2001, which was the equivalent of 1.5 years in pre-tax median household income. At 12.9 Sydney's Median Multiple is the poorest major housing affordability ever recorded by the Survey outside Hong Kong. Additionally, the UBS Global Real Estate Bubble Index rates Sydney as having the world’s fourth worst housing bubble risk (tied with Vancouver).19 Median Multiple Melbourne has a Median Multiple of 9.9 and is the fifth least affordable major housing market internationally. Only Hong Kong, Sydney, Middle-Income Housing Affordability Vancouver, and San Jose are less affordable AUSTRALIA: CAPITAL CITY HOUSING MARKETS: 1981-2017 than Melbourne. Melbourne's Median Multiple 15 Sydney has deteriorated from 6.3 in 2001 and under 3.0 Melbourne Brisbane 12 in the early 1980s. Just since 2001, median Adelaide Perth house prices have increased the equivalent of Hobart 9 Canberra more than three years in pre-tax median household income. 6 3 Adelaide has a severely unaffordable 6.6 th Median Multiple and is the 16 least affordable 0 of the 92 major markets. Brisbane has a Median 1981 th Multiple is 6.2 and is ranked 18 least affordable, while Perth, with a Median Multiple of 5.9 is the 21st least affordable major housing market in Australia. 1996 2011 Figure 6 18 House price data for Australia is estimated or obtained from multiple sources, such as the Real Estate Industry Association of Queensland (Queensland Market Monitor), the Real Estate Institute of Victoria, the Real Estate Institute of South Australia, the Real Estate Institute of Western Australia, Australian Property Monitors, the Real Estate Institute of Australia and various real estate internet web sites. House price data for some smaller markets is year to date data. Household income data has been recalibrated based on results from the 2016 census. 19 Toronto is rated with the worst housing "bubble risk," followed by Stockholm and Munich (the latter two are not rated in the Demographia Survey). 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 13 Other Housing Markets: Overall , Australia’s 22 housing markets20 have a severely unaffordable Median Multiple of 5.9. The most affordable markets are moderately affordable, Gladstone, Queensland at 3.2 and Rockhampton, Queensland at 3.9. There are no affordable or moderately affordable markets in Australia. Overall 15 markets in Australia are rated severely unaffordable. The least affordable are the Sunshine Coast, Queensland (9.0) and the Gold Coast, Queensland-New South Wales (8.4). Historical Context: Australia’s generally unfavorable housing affordability is in significant contrast to the broad affordability that existed before implementation of urban containment (called urban consolidation in Australia). As is indicated in Figure 2 the price-to-income ratio in Australia was below 3.0 in the late 1980s. All of Australia’s major markets have urban containment policy and all have severely unaffordable housing. 3.2: Canada House prices have been rising well above the economic fundamentals in Canada for at least a decade. Both international and national organizations have expressed concern about the damage that Canada's rising prices (some suggest a “housing bubble”) could do to the national economy.21 According to the Canada Mortgage and Housing Corporation (CMHC) there has been “strong evidence of problematic conditions for Canada overall. Home prices have risen ahead of economic fundamentals such as personal disposable income and population growth, resulting in overvaluation in many Canadian housing markets.” A 2016 Frontier Centre for Public Policy research report reviewed the strongly rising house prices relative to incomes in 35 markets across the nation.22 Major Housing Markets: Overall, Canada's six major markets have a seriously unaffordable Median Multiple of 4.3 (Figure 7) Vancouver's Median Multiple is the third worst in Survey history. Only Hong Kong and Sydney have been more unaffordable Vancouver is the least affordable market in Canada, with a Median Multiple of 12.6. This is the third worst housing affordability for a major market in the 14 years of the Demographia International Housing Affordability Survey, with only Hong Kong and Sydney posting less affordable Median Multiples . Vancouver has experienced the greatest housing affordability deterioration among major markets in the Demographia Annual International Housing Affordability Survey, with its Median Multiple rising by more than 2.35 times, from 5.3 in 2004 to 12.6 in 2017. The 2017 20 Fewer markets were included from Australia than in the past due to more limited data. See, for example, Organisation for Economic Co-operation and Development, “OECD Economic Surveys Canada,” June 2014. http://www.oecd.org/eco/surveys/Overview%20_CANADA_2014.pdf. International Monetary Fund, “2014 Article IV Consultation – Staff Report; Staff Statement; and Press Release,” IMF Country Report No. 15/22, January 2015. https://www.imf.org/external/pubs/ft/scr/2015/cr1522.pdf, Bank of Canada, “Financial System Review – December 2015.” http://www.bankofcanada.ca/2015/12/fsr-december-2015/. 22 Wendell Cox and Ailin He (2016), Canada’s Middle-Income Housing Affordability Crisis, Frontier Centre for Public Policy, https://fcpp.org/wp-content/uploads/2016/06/Cox-He-Middle-Income-Housing-Crisis.pdf. 21 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 14 UBS Global Real Estate Bubble Index rates Vancouver as tied (with Sydney) for the fourth worst housing "bubble risk" in the world. Median Multiple Vancouver had already developed a severely unaffordable housing market in the first Survey (2004), which has been associated with its urban Middle-Income Housing Affordability containment policy, adopted about five decades CANADA: MAJOR MARKETS: 2004-2017 ago. Vancouver has experienced the greatest 15 housing affordability deterioration among major markets in the Demographia Annual International 12 Toronto Housing Affordability Survey, with its Median Montreal Vancouver 9 Multiple deteriorating from 5.3 to 12.6, Ottawa Calgary equivalent to 7.2 years of pre-tax median Edmonton 6 household income. 9 3 The Province of British Columbia imposed a "foreign buyers" tax in July of 2016, hoping to 0 2004 2006 2008 2010 2012 2014 2016 reduce demand and bring the spiraling house Figure 7 prices under control. This appears to have cooled the hyper-inflation of house prices. Even so, house prices are now rising again, with the 10.9 percent increase over the past year approximately times the increase in average earnings. Price increases were moderated the most in the highly-sought after detached housing sector (2.9 percent), while prices at the middle of the market and lower ends of the market were much more, 14.5 percent in townhouses and 21.7 percent in apartment condominiums.23 Toronto also has a severely unaffordable housing market, with its Median Multiple deteriorating to 7.9, compared 3.9 in the first Survey (2004). The incomeOver 14 years, Toronto’s house adjusted median house price has increased the equivalent prices have doubled in relation to of four years in pre-tax median household income. The household incomes. 2017 UBS Global Real Estate Bubble Index rates Toronto as having the worst housing "bubble risk" in the world. Ryerson University researchers have responded to the serious housing affordability concerns by proposing a substantial expansion of the lower density ground oriented housing (detached and attached) preferred by the market.24 Current policy is skewed against the development of such housing. 23 Increase in Real Estate Board of Greater Vancouver benchmark price compared to increase in British Columbia average weekly earnings. 24 Clayton, Frank (2017), "Countering Myths about Rising Ground-Related Housing Prices in the GTA: New Supply Really Matters," Centre for Urban Research and Land Development Ryerson University 2017 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 15 In Toronto, the housing affordability loss has been associated with the middle-2000s adoption of urban containment policy (“Places to Grow”), including a Green Belt and other draconian restrictions. A Survey co-author predicted would lead to much worsened housing affordability.25 A foreign buyers tax (the "Non-Resident Speculation Tax") was imposed by the Province of Ontario in April of 2017, and appears to have interrupted Toronto's house price hyper-inflation as prices have stabilized or decline modestly. However, this was not enough to keep Toronto's Median Multiple from rising since the previous year. Montréal has seriously unaffordable housing (4.5), having deteriorated from a moderately unaffordable 3.1 in 2004. Calgary's seriously unaffordable housing has a Median Multiple of 4.1, compared to an affordable 3.0 in 2004. as does Calgary (4.1). Ottawa-Gatineau is moderately unaffordable, at 3.9, deteriorating from an affordable 2.9 in 2004. Canada’s most affordable major market is Edmonton (3.7), which is rated as moderately unaffordable. This is a deterioration from the affordable 2.8 Median Multiple in 2005, Edmonton's first Survey. Other Housing Markets: The overall Median Multiple for the 46 markets in Canada is a moderately unaffordable 3.9. For the sixth year in a row, Moncton (NB) is the most For the sixth year in a row, affordable market in Canada. Moncton, with a Median Moncton (NB) was the most Multiple of 2.1, and is an affordable market. Fredericton (NB) affordable market in Canada. and Fort McMurray (AB) have affordable Median Multiples of 2.2 and St. John (NB) has a Median Multiple of 2.3. There are seven other affordable markets. As in California, severely unaffordable housing seems to be spreading from the major markets to nearby markets. Severely unaffordable housing has spread from Vancouver to the British Columbia markets of Victoria (8.1), Nanaimo (7,2), the Fraser Valley (7.1), Chilliwack (6.8) and Kelowna (6.6). Markets near Toronto have also become severely uaffordable, such as Hamilton (6.6) and Oshawa (5.7). In Ontario's hyper-inflation of the last year, Guelph (6.0), Barrie (5.9), Kitchener-Waterloo (5.5), and St. Catharines-Niagara (5.2) all became severely unaffordable, with Kitchener-Waterloo, Guelph and St. Catharine-Niagara adding more than the equivalent of one-year's pre-tax median household income to the median price of houses. Cambridge, not rated before, is also severely unaffordable. The RBC Economics Affordability Measure: The RBC Economics Housing Affordability Report illustrates how middle-income households are being priced out of housing in Canada's unaffordable markets. The RBC Affordability Measure reports the monthly payments required for a median income household to pay for the average priced house. In Vancouver, the Affordability Measure is 121, indicating that the average priced single detached house (a typical house in Canada) requires 121 percent of a household's monthly income. In Toronto the figure is 94 percent. The aggregate for all 25 Wendell Cox (2004), Myths about Urban Growth and the Toronto Greenbelt, Fraser Institute. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 16 housing types in Vancouver is 88 percent. In both markets, the costs of even the affordability of the least expensive product, apartment condominiums exceeds the widely held guideline that housing costs should consume no more than 30 percent of household income (Figure 8). The report also indicates that, on average, the average Canadian median income household would pay more than 30 percent of their income for the average priced house (49 percent) as well as in Montréal, Calgary, and Ottawa-Gatineau. The problem extends to the other markets as well. In Victoria, the RBC Economics Affordability Measure is above 60, and over 30 in Saskatoon, Winnipeg, Quebec (City) and Halifax. Share of Pre-Tax Income Required MEDIAN PRICED HOUSE: VANCOUVER & TORONTO AREAS % of Pre-Tax Median Household Income 140% 100% Historical Context: Until fairly recently, most 93.8% 87.9% Aggregate 78.4% 80% Single-Family Detached Condominium Apartment 60% 50.1% 43.4% 40% 20% 0% Vancouver Area Toronto Area Figure 8 Source: RBC Economics Middle-Income Affordability History CANADA: MAJOR HOUSING MARKETS: 1970-2017 15 Toronto Montreal Vancouver Ottawa Calgary Edmonton 12 Median Multiple of Canada had been characterized by affordable, stable house prices. From the early 1970s to the first Demographia International Housing Affordability Surveys (2004 and 2005) there was virtually no housing affordability deterioration in the major markets, with the exception of Vancouver. The rapidly escalating prices of houses has been associated with wider adoption of urban containment policies. Even in Vancouver, the deterioration in housing affordability over the past 13 years (7.6 years of pre-tax median household income) was more than five times that of the 1.4 years deterioration observed in the previous three decades (Figure 9). 120.7% 120% 9 6 3 0 1970 2004-2005 2017 Figure 9 3.3: China Hong Kong is China's only market in the Demographia International Housing Affordability Survey. Hong Kong has the least affordable housing for the eighth straight year, with a Median Multiple of 19.4.26 This is the highest Median Multiple ever reported in the Survey, having risen from 18.1 last year. The UBS Global Real Estate Bubble Index rates Hong Kong as having the world’s seventh worst housing bubble risk. 26 Estimated from Hong Kong Residential Units Consideration Range and Hong Kong Private Domestic Price Index. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 17 Historical Context: Hong Kong's housing affordability was far Hong Kong's Median better in the early 2000's. According to The Chinese University of Multiple of 19.4 is the Hong Kong's' Quality of Life Index the price-to-income ratio rose highest in the history of the from 4.6 in 2002 and peaked at 15.7 in 2015, based on a 39.9 Demographia Survey square meter apartment (430 square feet). Academic research has indicated that Hong Kong’s house prices have been driven higher by restrictive land-use regulation.27 3.4: Ireland Overall, Ireland's Median Multiple is a moderately unaffordable 3.7, tied for the best housing affordability with the United States. Major Housing Market: Dublin is Ireland’s only major metropolitan area market and has a seriously unaffordable Median Multiple, of 4.8. This is up nearly 50 percent from 3.3 in 2011.28 Other Housing Markets: Galway (4.0) and Cork (3.7) are moderately unaffordable, while Waterford (2.7) and Limerick (2.2) are rated affordable. Historical Context: As is indicated in Figure 1, Ireland had a price-to-income multiple of less than 3.0 in the early 1990s. 3.5: Japan The Average Multiple (average house price divided by average household income) is used for the markets in Japan.29 Japan has a seriously unaffordable major market Median Multiple of 4.2. Major Housing Markets: Data is available for only two of Japan's two major housing markets, Tokyo-Yokohama and Osaka-Kobe-Kyoto. Tokyo-Yokohama is the world's largest urban area (38 million).30 The metropolitan area covers all or part of four prefectures, Tokyo,31 as well as largely suburban Kanagawa, Saitama and Chiba. Tokyo-Yokohama and OsakaKobe-Kyoto continue to have the best housing affordability of any megacities (over 10 million residents) Osaka-Kobe-Kyoto ranks as the 14th largest urban area in the world (17 million) and the third largest housing market covered in the Demographia International Housing Affordability Survey (After 27 C. M. Hui & F. K. Wong (n.d.), "Dynamic Impact of Land Supply on Population Mobility with Evidence from Hong Kong," http://www.prres.net/Papers/Hui_Dynamic_impact_of_land_supply_on_population_mobility.pdf. 28 Median house prices are calculated from the Residential Price Register. Household incomes have been recalibrated. 29 Data for calculating Median Multiples is not available. The Average Multiple is generally comparable to the Median Multiple in the United States and Canada (see the 10th Annual Demographia Housing Affordability Survey). 30 Demographia World Urban Areas, http://demographia.com/db-worldua.pdf. 31 Tokyo prefecture is called the Tokyo metropolis, which can be misleading, because the prefecture has only one-third of the metropolitan area population. The failure to understand this distinction has resulted in invalid demographic analyses, not only popular but also academic. The 23 wards of the former city of Tokyo are within the prefecture of Tokyo and comprise approximately 70 percent of its population. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 18 Tokyo and New York). Osaka-Kobe-Kyoto covers all or part of Osaka, Hyogo, Kyoto and Nara prefectures.32 Osaka-Kobe-Kyoto is the most affordable megacity (over 10 million population) in the Survey, with an Average Multiple of 3.5, earning a moderately unaffordable rating. Osaka-Kobe-Kyoto is also the most affordable major housing market outside the United States, ranking 19th out of 92. TokyoYokohama is the second most affordable megacity in the Survey, with a seriously unaffordable Average Multiple of 4.8. Historical Context: Historical price-to-income multiple data has not been identified for Japan. 3.6: New Zealand New Zealand's housing affordability indicates an improvement that largely due to an upward restatement of median for the last decade by Statistics New Zealand.33 Even so, New Zealand's housing remains severely unaffordable, with a Median Multiple of 5.8. Auckland has been severely unaffordable in all 14 Demographia Surveys Major Housing Market: Auckland, New Zealand’s only major Other Housing Markets: There is severely unaffordable housing in the two largest markets outside Auckland. Christchurch has a Median Multiple of 5.4, while Wellington is at 5.5. Housing Affordability and Public Policy: Outside Singapore, New Zealand is the only Median Multiple housing market has a severely unaffordable 8.8 Median Multiple. Housing affordability has deteriorated from a Median Multiple of 5.9 in the first Survey (2004), thus adding the equivalent of nearly three years in pre-tax median household income to the house prices. Auckland34 is the ninth least Middle-Income Housing Affordability affordable among the 92 major housing markets, NEW ZEALAND: 3 LARGEST MARKETS: 2004-2017 9 and has been severely unaffordable in all 14 Demographia International Housing Affordability Surveys.35 6 Auckland Christchurch Wellington 3 0 2004 2006 2008 2010 2012 2014 2016 2013-2017 scaled based on Statistics New Zealand income restatement. Figure 10 32 See Demographia World Urban Areas: 2016, http://demographia.com/db-worldua.pdf. The national median household income was restated to show a 25 percent increase, instead of a 10 percent increase from the census year of 2013 to 2017. See: "Household income and housing-cost statistics: Year ended June 2017 corrected" (December 7, 2017), https://www.stats.govt.nz/news/household-income-and-housing-cost-statistics-year-ended-june-2017-corrected. 34 The city of Auckland governs virtually the entire metropolitan area (housing market area or labor market area). Auckland and Honolulu are unique among metropolitan areas of more than 1,000,000 in being governed by a single local authority. 35 Median house prices are from the Real Estate Institute of New Zealand. Household incomes have been recalibrated as a result of the income restatement by Statistics New Zealand. 33 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 19 nation in the Survey demonstrating a serious public policy priority to restore and maintain middleincome housing affordability. In New Zealand, as in Australia, housing had been affordable until approximately a quarter century ago. However, urban containment policies were adopted across the country, and consistent with the international experience, housing became severely unaffordable in all three of New Zealand’s largest housing markets, Auckland, Christchurch and Wellington (Figure 10). Meanwhile, public opinion placed the issue of housing affordability to the top of the policy agenda in the last three national elections. In the 2017 election, the opposition Labour Party unveiled a focused housing affordability program and was able to form a ruling coalition with two other parties. The resulting Sixth Labour Government intends to increase housing supply throughout Auckland, including both urban fringe and infill development. Critically, the government intends to implement affordable infrastructure financing options for new development. The new Labour government plans to increase supply and These developments build on other recent developments, develop affordable infrastructure especially a Productivity Commission of New Zealand financing options for new report, which found that land use authorities have a development responsibility to provide “capacity to house a growing population while delivering a choice of quality, affordable dwellings of the type demanded ….”36 Consistent with that finding, the Productivity Commission proposed a measure that would automatically expand the supply of greenfield land when housing affordability targets are not met. The Commission said, “Where large discontinuities emerge between the price of land that can be developed for housing and land that cannot be developed, this is indicative of the inadequacy of development capacity being supplied within the city.” The Productivity Commission expansion of greenfield land for development where the difference between land prices on either side of an urban containment boundary become too great.37 Historical Context: As indicated in Figure 1, New Zealand’s price-to-income ratio was below 3.0 in the early 1990s. 3.7: Singapore The Median Multiple in Singapore is 4.8, for a seriously unaffordable rating. This is an improvement from the severely unaffordable 5.1 Median Multiple in 2013, when Singapore was added to the Survey. The Singapore Regulatory Model: Singapore is particularly challenged by its borders, having among the most land constrained geography of any major metropolitan area in the world. Singapore is an island smaller than the land area of the municipalities (not metropolitan areas) of Kansas City, 36 37 Productivity Commission of New Zealand, “Using Land for Housing.” The Productivity Commission did not propose a standard. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 20 Missouri or Calgary, Alberta. Singapore has no mainland periphery within its national jurisdiction and, as a result, does not have the luxury of a potentially competitive market for housing land that would keep housing affordable.38 These unique circumstances led the Singapore government to establish a publicly sponsored housing construction program, which sells houses to consumers (which though still called "public housing" are "privately owned"). The result is a vibrant competitive housing market. According to the Housing and Development Board (HDB), which administers the program, 82 percent of residents live in HDB housing.39 Further, Singapore has an overall 88 percent rate of home ownership, the highest of any country in the Survey. Buyers are free to sell their own houses as in other nations with private Singapore’s unique success is ownership. Further, there are restrictions on foreign associated with its long-standing ownership, which may have shielded Singapore from the public commitment to keeping heightened cost escalation occurring from globalization house prices under control of the real estate markets in an environment of significant land supply restrictions (such as urban containment policy) that has made places like Vancouver, Sydney, San Francisco and London so attractive for real estate investors (speculators). HDB has increased the rate of construction in recent years, and the additional supply has been associated with the intended result of better housing affordability. Moreover, housing affordability for new houses appears to be better (Table 9: New House Affordability in Singapore).40 Comparison to Other Highly Regulated Markets: Singapore has avoided the rampant house price escalation relative to incomes of other highly regulated markets, This includes markets following in the British urban containment model, which can be largely traced to the Town and Country Planning Act of 1947. Singapore’s success relative to similar markets is associated with its long-standing public commitment to keeping house prices under control. HDB has a government imposed mandate to ensure housing affordability: As HDB transitioned from a program principally aimed at rented social housing to one of home ownership, the 1964 HDB Annual Report, stated its intention to ...encourage a property-owning democracy in Singapore and to enable Singapore citizens in the lower middle income group to own their own homes41 In the intervening years, Singapore has succeeded in this objective. The contrast is great between the present situation and that of 50 years ago, when there were large squatter settlements. According to 38 Faced with a similar situation, treaties between Switzerland, France and Germany effectively create international metropolitan areas (labor markets) by the use of cross border commuting permits in the Basel and Geneva areas. 39 Housing Development Board, Key Statistics for FY 2016/2017, http://www10.hdb.gov.sg/ebook/AR2017/html5/index.html?opf=tablet/2017-keystatistics.xml&launchpage=http://www10.hdb.gov.sg/ebook/AR2017/key-statistics.html. 40 Median house price is from the Singapore Real Estate Exchange (resale houses). 41 Housing and Development Board 1964 Annual Report. http://www.globalurban.org/GUDMag07Vol3Iss1/Yuen.htm. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 21 2016 estimates by the World Bank, Singapore has the highest gross domestic product per capita in the world (purchasing power parity adjusted) among the nine nations in the 14th Annual Demographia International Housing Affordability Survey. At $88,000,42 Singapore ranks fourth highest in the world, behind only Qatar, China's Macao Special Economic Region and Luxembourg. Finally, the HDB model may play an important housing market role in the new Xiongan New Area (special economic zone) at the core of the planned Jingjinji, the complex that will economically integrate Beijing, Tianjin and northern Hebei. According to the People's Daily publication Global Times, central government officials have indicated that Xiongan will "very likely follow" the Singapore model to ensure housing affordability. This could assist in managing the housing market to avoid the housing affordability problems that have plagued China's largest cities in recent years.43 Historical Context: Historical price-to-income multiple data has not been identified for Singapore. Table 9 NEW HOUSE AFFORDABILITY IN SINGAPORE The Singapore government has taken additional actions to improve housing affordability through its Housing and Development Board. One strategy has been to increase what are effectively “across the board” subsidies for all new houses (not counting special grants, such as for first home buyers). The result has been to reduce new house prices to levels well below those of existing houses. At the same time, price-reducing grants are available to eligible resale house buyers. As in other nations, the Survey does not account for these grants in measuring Singapore's housing affordability. This would be virtually impossible, because of the difficulty of obtaining comparable data and the complexity of evaluating uniquely designed home ownership incentives. However, it is noted that the practice in Singapore may be substantially greater than in other nations, which would seem to have a positive influence on housing affordability. The most recent new house offering by HDB (November 2017) indicates after after-grant prices ranging from $175,000 to $305,000 for the most popular floor plan. The midpoint of this pricing would be under 3.0 times the median household income. These flats are 90 square meters (970 square feet). This is larger than the average of 44 square feet for flats44 in Hong Kong and 84 square meters for new houses in the United Kingdom, but smaller than new houses in Denmark (137 square meters) and the United States (219 square meters).45 Thus, Singapore's approach to the housing market has delivered residents comparatively larger living quarters than in some other countries. 42 International dollar, purchasing power parity. "Xiongan very likely to follow example of Singapore in land management: advisor" (October 23, 2017), Global Times. 44 Peter Kamerer (September 12, 2016), "When Hong Kong flats are the size of a parking space, something is deeply wrong," South China Morning Post, http://www.scmp.com/comment/insight-opinion/article/2018561/when-hong-kong-flats-are-size-parking-space-somethingdeeplyhttp://www.scmp.com/comment/insight-opinion/article/2018561/when-hong-kong-flats-are-size-parking-space-somethingdeeply 45 See Introduction. 43 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 22 3.8: United Kingdom The United Kingdom has a seriously unaffordable major market Median Multiple of 4.6 and a seriously unaffordable Median Multiple of 4.5 overall.46 Major Housing Markets: None of the United Kingdom’s 21 major housing markets is affordable. One major market is moderately unaffordable (Glasgow, at 3.9), and six are severely unaffordable. There is a need to alleviate supply constraints: IMF The U.K.’s largest market, London (the Greater London Authority, inside the London greenbelt) has a severely unaffordable Median Multiple of 8.5 and is rated the 10th least affordable major market in the Survey. In 2005, London had a Median Multiple of 6.9, indicating that house prices have increased by the equivalent of 1.6 years of pre-tax median income since that time. The UBS Global Real Estate Bubble Index rates London as having the world’s fourth worst housing bubble risk. Five other major markets are severely unaffordable, including Bournemouth & Dorset, at 7.3, the London Exurbs (East and Southeast England, virtually all outside the London greenbelt) at 6.9, Bristol-Bath at 6.8, Plymouth & Devon at 6.1, as well as Leicester and Leicestershire at 5.2. Other Housing Markets:. Among the 33 housing markets in the United Kingdom, none are affordable. there are four markets outside the major markets are moderately unaffordable (Falkirk, at 3.7, Dundee, at 3.9 as well as Belfast and Swansea, at 4.0). Outside the major housing markets, there are four severely unaffordable housing markets, including Swindon & Wiltshire (6.0), Northampton & Northamptonshire (5.8), Warwickshire (5.7) and Telford & Shropshire (5.2). Historical Context: The Town and Country Planning Act (1947) enacted the first important urban In the last two decades, house prices have raced ahead of earnings (Figure 11). In England, house prices rose at 2.2 times that of earnings. In London, house prices rose at 3.2 earnings. Even in the comparatively depressed North East, house prices rose at approximately 1.75 times earnings. Median House Price to Median Earnings ENGLAND & REGIONS: 1997 TO 2016 Ratio: House Price to Earnings (Median) containment restrictions and has been a model for such restrictions around the world. Urban containment policy was substantially strengthened during the 1990s and early 2000s. All markets have urban containment policy. 14 12 1997 2016 10 8 6 4 2 0 Source: Data.gov.uk & Office for National Statistics Figure 11 46 Median house prices are calculated from the Land Registry of England and Wales, the Registers of Scotland and Northern Ireland Residential Property Price Index. Household income data has been recalibrated for this edition. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 23 Various analyses have documented the association between UK's urban containment policies and its excessively high house prices. For example, the Blair government commissioned reports by Kate Barker (2004 and 2006), and then a member of the Monetary Policy Committee of the Bank of England, which attributed much of the nation’s housing affordability loss to its urban containment policies. Sir Peter Hall, et al, expressed concerns about the housing affordability losses associated with urban containment in the early 1970s.47 A report by the International Monetary Fund48 indicated the need to alleviate supply-side constraints, “notably pertaining to Britain:"originator of the ideas planning restrictions…” and mechanisms of planning which have contributed so much In the Introduction to this Demographia International Housing to the problem: Green Belts and Affordability Survey, Felipe Carozzi, Paul Cheshire and planning by unpredictable Christian Hilber of the London School of Economics refer political processes to Britain as the cradle of housing unaffordability, and its role as "originator of the ideas and mechanisms of planning which have contributed so much to the problem: Green Belts and planning by unpredictable political processes! As Figure 1 indicates, the price-to-income ratio was below 3.0 until after 2000 in the United Kingdom. 3.9: United States Overall, the United States has a moderately unaffordable Median Multiple of 3.7, 49 tied for the most affordable in this year's Survey. Among all housing markets, 49 are rated affordable and 30 are rated severely unaffordable Major Housing Markets: The United States has a moderately unaffordable Median Multiple of 3.8 in its major markets. This is the most favorable major market housing affordability in this year’s Survey. There are 10 affordable major housing markets in the United States and 13 severely unaffordable markets. The most affordable major housing market is Rochester, with a Median Multiple of 2.6, followed by Cincinnati and Cleveland with a Median Multiple of 2.7. Buffalo and Oklahoma City have Ohio has three of the most affordable major markets ... an accomplishment not matched by any other national or sub-national geography. 47 Hall, Peter Geoffrey, Ray Thomas, Harry Gracey and Roy Drewett. The Containment of Urban England: The Planning System: Objectives Operations, Impacts. Vol. 2 Allen and Unwin [for] PEP, 1973. 48 International Monetary Fund, Country Report: United Kingdom: Selected Issues, http://www.imf.org/external/pubs/ft/scr/2015/cr14234.pdf, 2015. 49 Median house prices from the National Association of Realtors and the National Home Builders Association, Zillow and metropolitan area real estate associations. Household incomes are based on the 2016 American Community Survey (U.S. Census Bureau). 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 24 a Median Multiple of 2.8. St. Louis and Detroit have a Median Multiple of 2.9, while Grand Rapids and Indianapolis have a Median Multiple of 3.0. Columbus is one of the markets with a Median Multiple of 3.1, slightly worse than an affordable rating. As a result, Ohio has three of the most affordable major markets in the Survey, an accomplishment not matched by any other national or sub-national geography. The five major housing markets with the poorest U.S. housing affordability are in California and Hawaii. San Francisco Bay Area housing market San Jose is the least affordable, with a severely unaffordable Median Multiple of 10.3, the highest reached by San Jose including the real estate bubble years. Los Angeles is the second least affordable, with a Median Multiple of 9.4. Honolulu is the third least affordable, with a Median Multiple of 9.2, while San Francisco has a Median Multiple of 9.1. San Diego is the fifth least affordable major housing market, with a California's high house Median Multiple of 8.4. There are eight additional severely prices have made resulted unaffordable major housing markets in the United States, including Miami (6.5), Seattle (5.9), Denver (5.7), New York (5.7) and in the highest poverty rate Riverside-San Bernardino (5.7), which is adjacent to Los Angeles. in the United States Additionally Boston and Portland, Oregon are severely unaffordable, with a Median Multiple of 5.5. In Portland, there has been a substantial deterioration of housing affordability with the Median Multiple up nearly three-quarters from 3.2 in 2000. Sacramento is also severely unaffordable, at 5.3. For the second year in a row, all major markets in the Pacific region (California, Washington, Oregon and Hawaii) are severely unaffordable. Median Multiple The housing bubble that precipitated the Great Financial Crisis of the mid-2000s was centered in the United States, where housing affordability reached, at least to that time unprecedented 10 Largest United States Markets unaffordability. Some US major markets have MIDDLE-INCOME HOUSING AFFORDABILITY: 1995-2017 12 now exceeded their unaffordability peak, including San Jose, Denver and Portland. The New York 9 other severely unaffordable markets remain Los Angeles Chicago below their housing bubble peaks (Los Angeles, Dallas-Fort Worth Houston Honolulu, San Francisco, San Diego, Miami, 6 Philadelphia Washington Seattle, Riverside-San Bernardino, New York, Miami Boston and Sacramento) Atlanta 3 Boston Among the 10 largest housing markets the 0 fastest rising house costs relative to incomes are 1995 2005 2015 Figure 12 Source: Harvard Joint Housing Center and Demographia in Los Angeles, which is reflected in smaller California housing markets (below) Miami's Median Multiple is also rising rapidly. At the same time, five of the largest markets, including Atlanta, Philadelphia, Chicago, Houston and Dallas-Fort Worth remain considerably more affordable (Figure 12) 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 25 The Housing Crisis in California: California continues to exhibit the most worrying housing affordability trends. Already, the new urban fringe housing, which drives housing affordability, is prohibited or severely limited by state and local policy. California's decades of restrictive land use regulation, including court decisions and far stronger environmental regulation than in the rest of the nation, has been associated with huge house price increases relative to incomes.50 This is illustrated in Figure 13 which shows California’s substantial housing affordability deterioration compared to the rest of the United States. Since 2010, Median Multiples in the six major California markets have increased at 7.6 times the rate of US liberally regulated major markets. As is occurring in Canada, smaller markets nearby the severely unaffordable major market in California are themselves becoming severely affordable, as has occurred major markets Riverside-San Bernardino and Sacramento and in the San Joaquin Valley markets of Fresno, Modesto and Merced. Finally, the state continues to have the highest housing cost adjusted poverty rate in the nation. The state continues to be a The five U.S. markets leader in net domestic migration losses, having shed 550,000 more with the poorest residents than moved in since 2010, with the rate of exodus affordability are in increasing. In 2017, California's net domestic migration loss was California and Hawaii three times than of 2011.51 There is also a significant outflow of 52 business investment. California & the United States Compared MIDDLE-INCOME HOUSING AFFORDABILITY: 1970-2017 10 9 8 Less Restrictive Markets (Liberal Regulation) More Restrictive Markets: Outside California More Restrictive Markets: California 7 Median Multiple Prospects appear to be particularly bleak in California. Already, the new urban fringe housing, which drives housing affordability, is prohibited or severely limited by state and local policy. Short term investment (“speculation”) is increasing, which is to be expected given the potential for windfall profits as the housing supply is subject to artificial and arbitrary limits that drive up excess demand. 6 5 4 3 2 While there is an increasing recognition that 1 solving California's housing affordability 0 1970 1980 1985 1990 1995 2000 2005 2010 2015 requires an increase in housing supply, the Figure 13 Derived from Census Bureau, Harvard University and Demographia. commitment thus far is limited to densification efforts, and would continue to ban suburban tract housing development on the urban fringe. Some analysts claim that urban fringe development is impossible because of topographic barriers. The 50 William A. Fischel, Regulatory Takings: Law, Economics, and Politics. Harvard University Press, 1995. Wendell Cox, "The Migration of Millions: 2017 State Population Estimates, http://www.newgeography.com/content/005840california-lithium-battery-maker-heads-appalachia. 52 See Joseph Vranich (2015), "California Companies Head for Greatness - Out of California," newgeography.com. Wendell Cox (2018), California Lithium Battery Manufacturer Heads to Appalachia, http://www.newgeography.com/content/005840california-lithium-battery-maker-heads-appalachia. 51 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 26 reality is that all of California's major metropolitan areas have sufficient adjacent land to accommodate a healthy expansion of suburban development. However, without permitting the safety value of urban expansion to operate, it is likely that California's housing affordability will continue to deteriorate (Section 4). Indeed, there are proposals to further strengthen the urban fringe land use regulations that have played such an important part in making California so unaffordable. Already, California has the highest urban density of any US state. Other Housing Markets: The most affordable U.S. housing market in this year’s Survey is Youngstown, Ohio (1.9), which is also the most affordable in the Survey, Utica, New York has a Median Multiple of 2.1 and Peoria, Illinois a Median Multiple of 2.2. Somewhat unusually compared to previous editions, the United States has only five of the 10 most affordable markets, with four in Canada and one in Ireland. Santa Cruz, California, located in the San Francisco Bay Area, is the least affordable market in the in the United States, with a severely unaffordable Median Multiple of 10.4, Santa Barbara, California, has a Median Multiple of 9.4. Historical Perspective: The United States had generally affordable housing through much of the period following World War II. The key was provision of tract housing on competitively priced inexpensive land in the suburbs, the beginnings of which have been credited to entrepreneurs such as William Leavitt, who built “Levittowns” and other similar developments in New York, New Jersey, Pennsylvania, Maryland and Puerto Rico. These communities were copied and improved upon, increasing the number of households able to live a middle-income quality of life. Similar communities emerged from Canada, Australia and New Zealand to other parts of the high income world. More recently, similar trends have been followed in emerging nations, such as Mexico, the Philippines, Chile, Indonesia, Thailand, Malaysia and countries in Central America. Median Multiples in the United States were overwhelmingly below 3.0 until the 1970s and remained at that level in most housing markets until the early 2000s. 4: HOUSING AFFORDABILITY: DETERMINING THE STANDARD OF LIVING Housing is the largest expenditure item in the household budget. Severely unaffordable housing can results in a severely unaffordable cost of living, which materially retards the standard of living. For example, in the United States, higher costs of living are strongly correlated the intensity of housing unaffordability. Among the 107 metropolitan areas with more than 500,000 population, there is a 0.82 correlation between higher costs of living for home purchasers and higher Median Multiples.53 53 Correlation is measured on a scale of from 1.00 (perfect correlation or perfect relationship) to minus 1.00 (no correlation or no relationship). This analysis compares 2016 costs of living for households moving to metropolitan areas and the corresponding Median Multiples, weighted by the national home ownership versus rental share. The calculation assumes the home buyer purchases the median priced house at typical purchase conditions. See Center for Opportunity Urbanism (2017), COU Standard of Living Index. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 27 Worsening housing affordability and its adverse impact on the standard of living declines threaten one of the greatest recent human advances – the democratization of prosperity. The abject poverty that had afflicted humanity for millennia until barely 200 years ago has been replaced by unimaginable affluence and dramatic reductions in poverty and considerable progress has been made since the World War II recovery. Economists Diedre McClosky of the University of Illinois (Chicago) and Robert Gordon of Northwestern University have published works documenting this progress. Example: Housing Costs of Living in the San Francisco and Atlanta Metropolitan Areas: Cost of Living Index: National = 100 The relationship between housing affordability and the standard of living is indicated in a comparison of the high cost of living San Impact of Housing on Cost of Living Francisco metropolitan area with the Atlanta SAN FRANCISCO & ATLANTA METROPOLITAN AREAS metropolitan area, which has an average cost of 200 180 living. Nominally, household income is much 160 higher in San Francisco, at least 50 percent higher 140 than in Atlanta. 120 100 80 San Francisco Atlanta Outside of housing, there is little difference in the 60 40 cost of living between the two metropolitan 20 areas, with San Francisco's costs being nine 0 Nominal Cost of Living Cost of Living Standard of percent higher than Atlanta's. But, including Median Without With Current Living Income Housing Median House Compared to housing, the cost of living is than 75 percent Purchase National higher in San Francisco than in Atlanta for a Figure 14 Source: Demographia estimates: See Figure Notes household purchasing the median priced house. This more than neutralizes San Francisco's nominal income advantage (Figure 14), giving the Atlanta resident a four percent discretionary income advantage for an equal array of goods and services.54 The extraordinarily high house prices have significantly reduced discretionary income in the costly markets that could otherwise be used for other goods and services. Not only would this additional consumption (or savings) increase the standard of living, but it would also lead to higher levels of employment and economic growth. Further, the higher housing prices feed the demand for more low-income affordable housing, which requires public subsidies. The higher prices make the housing market A well functioning housing market unaffordable for more households. delivers new houses for nor more than 25% above the minimum profitable Well Functioning Housing Markets: The key to production cost of construction both housing affordability and an affordable standard including land costs of 20% or less of living is a competitive market that produces housing (including the cost of associated land) at production costs, including competitive profit margins. Economists Edward Glaeser of Harvard University and Joseph Gyourko of the University of 54 The standard of living assumes a currently purchased median price house, with the rental housing share and a household with a median income. See: COU Standard of Living Index. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 28 Impact of Regulation on Land Price AVERAGE HOUSE: SAN FRANCISCO METROPOLITAN AREA $900,000 $800,000 Components of House Price Pennsylvania,55 refer to this as the minimum profitable production cost (MPPC). For single detached houses in the United States, their research indicates that land (with associated infrastructure) costs 20% or less of the MPPC final house and land sale price.56 Glaeser and Gyourko consider a housing market to be functioning well if houses are produced at no more than 25 percent above the MPPC. $700,000 $600,000 $500,000 Land (Finished) $400,000 Construction $300,000 $200,000 $100,000 $0 SF: If a Well-Functioning SF: Actual Urban The Demographia major housing markets Housing (Liberal) Market Containment Housing Market included in the Glaeser and Gyourko Figure 15 Source: Adapted from Glaeser & Gyourko, 2017: See Figure Notes. research had a 2.9 Median Multiple (rated affordable) over the nearly 30 years covered in the research. Housing has, however, become more expensive in the well functioning markets, having risen from a 2.7 Median Multiple in 1985 (Table 10).57 Glaeser and Gyourko find that there has been little change in construction costs over the period. However, land costs have risen substantially. For example, Glaeser and Gyourko find that virtually all of the costs above minimum production costs in the San Francisco metropolitan area are in land, which they estimate is 10 times the cost that would be expected in a well functioning housing market (Figure 15). Rather than representing 20 percent of the final cost, land represents more than 70 percent of the cost in their estimate.58 The San Francisco market, with its strong urban containment policies had been well-functioning before the imposition of restrictive land use regulation, when Median Multiples were under 3.0. Urban Containment Policy: In contrast with well functioning housing markets, virtually all the severely unaffordable major housing markets covered in the Demographia International Housing Affordability Survey have restrictive land use regulation, overwhelmingly urban containment. A typical strategy for limiting or prohibiting new housing on the urban fringe an "urban growth boundary," (UGB) which leads to (and is intended to lead to) an abrupt gap in land values (Figure 16).59 Contrary to expectations that higher densities would lower land costs and preserve housing affordability, house prices have skyrocketed inside the UGBs. The San Francisco example above indicates this result. This also leads to extraordinary price increases that attract investment Glaeser, Edward L and Joseph Gyourko (2017), “The Economic Implications of Housing Supply, Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania. http://realestate.wharton.upenn.edu/research/papers.php?paper=802 56 Finished land costs have generally been similar in Australia, Canada, New Zealand and the United Kingdom where there is liberal regulation. Land prices usually rise strongly after implementation of urban containment. 57 Demographia analysis. 58 Profit margins are proportionately allocated to construction and land for this analysis. 59 See: Restrictive Land-Use Regulation: Strategies, Effects and Solutions for a literature review and list of references. 55 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 29 (speculation), a factor that has little or no impact on middle-income housing affordability where there is liberal regulation (as opposed to urban containment). Table 10 AFFORDABLE HOUSING MARKETS: DEFINITION For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market. The critically important “development ratios”60 for this new fringe starter housing should be 17 - 23% serviced lot / section cost the balance the actual housing construction. Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector. -Hugh Pavletich Performance Urban Planning In fact, the higher land prices are consistent with the basics of economics, and this has led to higher house prices. Virtually across the road land value gaps of ten or more times result.61 This destroys the competitive market for land by removing the “supply vent”62 necessary to maintain housing affordability In the Introduction (above) economists Felipe Carozzi, Paul Cheshire and Christian Hilber of the London School of Economics refer to the "ideas and mechanisms of planning which have contributed so much to the problem" They specifically cite Green Belts, a form of urban growth boundary that has been associated with particularly large housing affordability deterioration in the United Kingdom (Section 3.8), Toronto (Section 3.2) and elsewhere. Urban Fringe Prohibitions & Land Prices EXAMPLE OF AN URBAN GROWTH BOUNDARY L a5 n d P 3 r i c e  Distance from City Center  1 City Center Adapted from Lincoln Institute of Land Use Policy Suburbs Exurbs Figure 16 60 The development ratio is the cost of the finished land (underlying infrastructure complete) divided by the house construction cost plus the finished land. This issue is extensively discussed with respect to the United States market in the Demographia Residential Land & Regulation Cost Index. 61 See: Wendell Cox. "A Question of Values: Middle-Income Housing Affordability and Urban Containment Policy." Frontier Centre for Public Policy, October 2015. https://www.fcpp.org/a_question_of_values. 62 See Table 3. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 30 Urban containment makes it virtually impossible to build the low cost suburban tract housing that made housing more inexpensive and led to higher rates of home ownership in the decades following World War II and the democratization of prosperity. The "Problem:" Urban Expansion: A principal purpose of urban containment policy is to stop the spatial expansion (pejoratively called “urban sprawl”) of urban areas. This justified by various rationales, such as the cost of infrastructure for new development, preservation of agricultural land and providing mass transit service throughout the urban form.63 The infrastructure financing concern can erroneously result from planning preferences rather than reality, according to urban economist Claude Gruen.64 Moreover, analyses typically fail to consider the extraordinarly house price increases that arise from severe limits on greenfield housing land, which can dwarf any anticipated higher infrastructure costs. Similarly, the need to preserve agricultural land has been exaggerated. Shlomo Angel, one of the world's leading urban experts, concluded that "added reserves of cultivatable land are available to feed the planet in perpetuity..." in an analysis of future urban and agricultural needs, in his classic Planet of Cities.65 The mass transit rationale for urban containment is based on an archaic, pre-automobile, early 20th century perception of cities as monocentric, organized around a central business district (CBD) containing a large share of employment. Most major metropolitan areas have less than 20 percent of their employment in the CBDs.66 From Tokyo to London, Toronto, Sydney, New York and Oklahoma City, far more employment is dispersed throughout the modern urban area and outside the CBDs. Mass transit, typically provides auto-competitive mobility to the CBD. Only much smaller percentages of commuters use mass transit for commuting to the more numerous suburban locations. For example, less than five percent of workers living in the outer counties of the London region or the New York metropolitan area commute to the CBD. In Sydney less than 10 percent workers outer suburbs such as Campbelltown and Penrith work in the inner city (a much larger area than the CBD), despite being well served by suburban trains.67 In the United States, the mass transit commute shares among inner city residents are more than 10 times that of the outer (later suburbs). 68 The outer suburbs have double the population of the inner cities. 63 Andrea Hopkins (October 16, 2016), "Short supply, bad infrastructure blamed for Canada housing bubble," Rueters, https://www.reuters.com/article/us-canada-economy-housing/short-supply-bad-infrastructure-blamed-for-canada-housing-bubbleidUSKCN1252LA. 64 See: Claude Gruen (2010), New Urban Development: Looking Back to See Forward, Rutgers University Press. 65 Shlomo Angel (2012), Planet of Cities, Lincoln Land Institute. Angel also provided the introductions to the 5th and 11th Annual Demographia International Housing Affordability Surveys. 66 See Demographia, "International Central Business District Market Share Trends," http://www.demographia.com/db-intlcbdtrends.htm. 67 Data from 2016 Australian Census provided by Urban Economics, Brisbane. Sydney inner city data refers to the 2016 Sydney Statistical Level 3 (SA3). 68 Wendell Cox (2017), "Measuring Urban Cores and Suburbs in the United States," Infinite Suburbia, Alan Berger and Joel Kotkin (editors) with Celine Balderas Guzman, Princeton Architectural Press. Based on analysis of functional sectors in the City Sector Model ("City Sector Model," 2018, http://www.newgeography.com/category/story-topics/city-sector-model). 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 31 The far higher house prices, higher cost of living and greater poverty associated with urban containment are an exorbitant price to pay for addressing problems that have been exaggerated or limiting organic urban expansion to serve such a small number of commuters. Urban Containment: A Solution Worse than the Problem: Within a quarter century of urban containment's original United Kingdom implementation, fabled urban planner Sir Peter Hall (who served at the London School of Economics) and colleagues concluded that “perhaps the biggest single failure” of urban containment has been its failure to prevent losses in housing affordability.69 The evidence that has developed in the nearly 50 years only confirms and amplifies that concern. Ineffective Initiatives: Various governments with urban containment policy have sought to bring control to their upward spiraling house prices. Foreign buyers taxes have been imposed in Vancouver and Toronto, strengthened mortgage eligibility requirements have been adopted, and affordable housing programs for low income citizens have been proposed. These have sometimes been mistaken by the media and others as addressing the middle-income housing affordability crisis. Unless urban fringe restrictions are relaxed enough to restore the competitive market for land, improved housing affordability is unlikely However, demand continues to exceed supply. If supply is not materially liberalized, worsened housing affordability is likely. Former Governor of the Reserve Bank New Zealand Donald Brash indicated: "...the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land."70 There is an emerging understanding that more housing supply is required to address housing affordability. However, in urban containment metropolitan areas, interest in new supply has been largely limited to higher density infill, while leaving the urban periphery restrictions in place (Section 3.9). This seriously diminishes the potential for improving housing affordability, because the lowest land prices are on the urban periphery and because there is substantial demand for the larger housing, preferred by families, that can only be economically built there. Unless urban fringe restrictions are relaxed enough to restore the competitive market for land, improved housing affordability is unlikely (Figure 15, above). On the contrary, even with torrid high-density building rates in urban cores, such as Vancouver, Toronto and Sydney, housing affordability has continued to worsen. Even in Inner London prices have continued to increase, despite the greatest urban core densification in the high-income world.71 69 Hall, Peter Geoffrey, Ray Thomas, Harry Gracey and Roy Drewett (1973). The Containment of Urban England: The Planning System: Objectives Operations, Impacts. Vol. 2 Allen and Unwin [for] PEP, 1973 70 From the Introduction to the 4th Annual Demographia International Housing Affordability Survey, http://www.demographia.com/dhi2008.pdf. 71 Since 1991, Inner London has added more than 900,000 residents, an increase of more than one-third. This is addition in population density is greater than the existing population density of the Sydney urban area (urban center). Data from the Office for National Statistics (UK) and the Australian Bureau of Statistics. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 32 Signs of Progress: There are some signs of progress. The greater emphasis on the need for additional supply is an important step in the right direction, even if the proposed strategies fail to deal with the root of the problem. Elsewhere, however, governments have and are embracing approaches more complete approaches. Most recently, New Zealand's just elected (2017) Sixth Labour government of New Zealand has committed itself to an urban agenda that includes both supply and demand strategies and innovative proposals for bond financing of infrastructure in developing areas. This could develop into an important model for others to follow (Section 3.6). Over a longer term (50 years), Singapore has pursued proactive policies designed to preserve housing affordability, which have performed remarkably well, in view of its geographical restrictions and strong population growth. This model may be emulated in China's Xiongan new area (Section 3.7). Putting People First: Urban planning, like other fields of public administration, is justified by its contribution to the public good. Michael Silver, a former president of the American Planning Association suggested that the purpose of planning is the orderly growth and development of communities, and the faithful protection of the public interest. 72 He went on to say: "Planners are guardians of a common future and plan for the needs of present and future generations. Planning is intended to focus on “place” and “people” (emphasis in original). In her legendary book, The Life and Death of Great American Cities, Jane Jacobs said "...a metropolitan economy, if it is working well, is constantly transforming many poor people into middle-class people..."73 In her last interview, she said that "If planning helps people, they ought to be better off as a result, not worse off."74 The tragedy is that strong land use regulation, especially urban containment, has been associated with making people worse off economically, the starkest example of which may be affluent and over-regulated California,75 now with the highest poverty rate in the United States, due to its high housing costs (Section 3.9). Indeed, a growing body of research associates strong land use regulation with diminished economic growth.76 Matthew Rognlie (now of Northwestern University) found that virtually all of the rising recent inequality in wealth was related to housing and suggested re-examination of the housing regulation. 77 72 http://www.smartcitymemphis.com/2013/07/city-planning-anyone/ Jacobs, Jane (1961), The Death and Life of Great American Cities, Vintage 1992 74 https://www.citylab.com/equity/2016/05/jane-jacobs-quotes-last-interview-100th-birthday/481053/ 75 See for example, Legislative Analyst's Office (state of California), 2015, http://www.lao.ca.gov/reports/2015/finance/housingcosts/housing-costs.pdf. 76 See for example, Hsieh, Chang-Tai and Enrico Moretti (2015). “Why Do Cities Matter? Local Growth and Aggregate Growth.” The National Bureau of Economic Research. http://www.nber.org/papers/w21154. 77 Matthew Rognlie, "A note on Piketty and diminishing returns to capital," http://gabriel-zucman.eu/files/teaching/Rognlie14.pdf 73 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 33 Paul C. Cheshire, Max Nathan and Henry G. Overman of the London School of Economics summarize the fundamental point succinctly: “… improving places is a means to an end, rather than an end in itself.”78 78 Cheshire, Nathan and Overman, Urban Economics and Urban Policy. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 34 SCHEDULE 1 MAJOR HOUSING MARKETS RANKED BY AFFORDABILITY: Most Affordable to Least Affordable Median Multiple (Median House Price/Median Household Income): 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey Rank 1 2 2 4 4 4 7 7 9 9 11 11 11 14 14 16 16 16 19 19 19 22 23 23 23 26 26 26 26 26 31 31 33 33 35 35 35 35 35 40 40 40 40 44 44 44 Nation U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Japan U.S. U.S. U.S. Canada U.S. U.S. U.S. U.S. U.S. U.S. U.S. Canada U.K. U.S. U.S. Canada U.K. U.K. U.S. U.S. U.S. U.S. U.S. U.S. U.K. U.K. U.K. Metropolitan Market Rochester, NY Cincinnati, OH-KY-IN Cleveland, OH Buffalo, NY Oklahoma City, OK Pittsburgh, PA Detroit, MI Saint Louis, MO-IL Grand Rapids, MI Indianapolis, IN Columbus, OH Kansas City, MO-KS Louisville, KY-IN Atlanta, GA Hartford, CT Baltimore, MD Memphis, TN-MS-AR Minneapolis-St. Paul, MN-WI Osaka-Kobe-Kyoto* Philadelphia, PA-NJ-DE-MD Virginia Beach-Norfolk, VA-NC Raleigh, NC Edmonton, AB Birmingham, AL Houston, TX Charlotte, NC-SC Chicago, IL Dallas-Fort Worth, TX Nashville, TN San Antonio, TX Ottawa-Gatineau, ON-QC Glasgow Jacksonville, FL Richmond, VA Calgary, AB Blackpool & Lancashire Sheffield & South Yorkshire Austin, TX New Orleans, LA Milwaukee, WI Phoenix, AZ Salt Lake City, UT Washington, DC-VA-MD-WV Derby & Derbyshire Leeds & West Yorkshire Liverpool & Merseyside Median Multiple 2.6 2.7 2.7 2.8 2.8 2.8 2.9 2.9 3.0 3.0 3.1 3.1 3.1 3.2 3.2 3.4 3.4 3.4 3.5 3.5 3.5 3.6 3.7 3.7 3.7 3.8 3.8 3.8 3.8 3.8 3.9 3.9 4.0 4.0 4.1 4.1 4.1 4.1 4.1 4.2 4.2 4.2 4.2 4.3 4.3 4.3 Rank 44 44 49 49 51 51 51 51 55 55 55 58 59 59 59 59 59 64 65 66 67 67 69 69 69 72 72 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 Nation U.S. U.S. U.K. U.K. Canada U.K. U.K. U.S. U.K. U.K. U.S. U.S. Ireland Japan Singapore U.K. U.K. U.K. U.K. U.S. U.S. U.S. U.S. U.S. U.S. Australia U.S. U.K. Australia U.S. Australia U.K. U.K. U.K. Canada U.S. U.K. N.Z. U.S. U.S. U.S. Australia U.S. Canada Australia China Metropolitan Market Tampa-St. Petersburg, FL Tucson, AZ Middlesbrough & Durham Newcastle & Tyneside Montréal, QC Edinburgh Stoke on Trent & Staffordshire Providence, RI-MA Manchester & Greater Manchester Nottingham & Nottinghamshire Orlando, FL Las Vegas, NV Dublin Tokyo-Yokohama* Singapore Hull & Humber Warrington & Cheshire Birmingham & West Midlands Leicester & Leicestershire Sacramento, CA Boston, MA-NH Portland, OR-WA Denver, CO New York, NY-NJ-PA Riverside-San Bernardino, CA Perth, WA Seattle, WA Plymouth & Devon Brisbane, QLD Miami, FL Adelaide, SA Bristol-Bath London Exurbs (E & SE England) Bournemouth & Dorsett Toronto, ON San Diego, CA London (Greater London Authority) Auckland San Francisco, CA Honolulu, HI Los Angeles, CA Melbourne, VIC San Jose, CA Vancouver, BC Sydney, NSW Hong Kong 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) Median Multiple 4.3 4.3 4.4 4.4 4.5 4.5 4.5 4.5 4.6 4.6 4.6 4.7 4.8 4.8 4.8 4.8 4.8 5.0 5.2 5.3 5.5 5.5 5.7 5.7 5.7 5.9 5.9 6.1 6.3 6.5 6.6 6.8 6.9 7.3 7.9 8.4 8.5 8.8 9.1 9.2 9.4 9.9 10.3 12.6 12.9 19.4 35 SCHEDULE 2 ALL HOUSING MARKETS RANKED BY AFFORDABILITY: Most Affordable to Least Affordable Median Multiple (Median House Price/Median Household Income): 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey Rank 1 2 2 4 4 4 4 8 8 10 10 10 10 14 14 16 16 16 16 16 16 16 16 24 24 24 24 24 24 24 24 24 33 33 33 33 33 33 33 33 41 41 41 41 41 41 Nation U.S. Canada U.S. Canada Canada Ireland U.S. Canada U.S. U.S. U.S. U.S. U.S. U.S. U.S. Canada Canada U.S. U.S. U.S. U.S. U.S. U.S. Canada Canada Canada Ireland U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Metropolitan Market Youngstown, OH-PA Moncton, NB Utica, NY Fort McMurray, AB Fredericton, NB Limerick Peoria, IL Saint John, NB Scranton-Wilkes Barre, PA Cedar Rapids, IA Davenport, IA-IL Rockford, IL Syracuse, NY Erie, PA Wichita, KS Charlottetown, PEI Chatham, ON Canton, OH Ft. Wayne, IN Lansing, MI Rochester, NY South Bend, IN Toledo, OH Cape Breton, NS Saguenay, QC Trois-Rivières, QC Waterford Akron, OH Cincinnati, OH-KY-IN Cleveland, OH Dayton, OH Little Rock, AR Buffalo, NY Harrisburg, PA Kalamazoo, MI New London, CT Oklahoma City, OK Omaha, NE-IA Pittsburgh, PA York, PA Amarillo, TX Des Moines, IA Detroit, MI Duluth, MN Fayetteville, NC Green Bay, WI Median Multiple 1.9 2.1 2.1 2.2 2.2 2.2 2.2 2.3 2.3 2.4 2.4 2.4 2.4 2.5 2.5 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.9 2.9 2.9 2.9 2.9 2.9 Rank 41 41 41 41 41 52 52 52 52 52 52 52 52 52 52 52 63 63 63 63 63 63 63 63 63 72 72 72 72 72 72 72 72 80 80 80 80 80 85 85 85 85 85 85 85 92 Nation U.S. U.S. U.S. U.S. U.S. Canada Canada U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Canada U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Australia Canada Canada U.S. U.S. U.S. U.S. U.S. Canada Canada U.S. U.S. U.S. Canada Canada U.S. U.S. U.S. U.S. U.S. Canada Metropolitan Market Gulfport, MS Mobile, AL Reading, PA Saint Louis, MO-IL Springfield, MO Sarnia, ON Windsor, ON Flint, MI Grand Rapids, MI Hagerstown, MD-WV Indianapolis, IN Lancaster, PA Lexington, KY Lincoln, NE Montgomery, AL Sioux Falls, SD Thunder Bay, ON Allentown, PA Beaumont, TX Columbia, SC Columbus, OH Kansas City, MO-KS Killeen , TX Louisville, KY-IN Tulsa, OK Gladstone, QLD Regina, SK St. John's, NL Albany, NY Atlanta, GA Brownsville, TX Hartford, CT Huntsville, AL Lethbridge, AB Red Deer, AB Atlantic City, NJ Spartanburg, SC Winston-Salem, NC Halifax, NS Québec, QC Baltimore, MD Corpus Christi, TX Memphis, TN-MS-AR Minneapolis-St. Paul, MN-WI New Haven, CT Sherbrooke, QC 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) Median Multiple 2.9 2.9 2.9 2.9 2.9 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.3 3.3 3.3 3.3 3.3 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.5 36 SCHEDULE 2 ALL HOUSING MARKETS RANKED BY AFFORDABILITY: Most Affordable to Least Affordable Median Multiple (Median House Price/Median Household Income): 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey Rank 92 92 92 92 92 92 92 92 92 92 92 92 92 106 106 106 106 106 111 111 111 111 111 111 111 111 111 120 120 120 120 120 120 120 120 120 120 130 130 130 130 130 130 130 130 130 Nation Japan U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Canada Canada U.S. U.S. U.S. Canada Ireland U.K. U.S. U.S. U.S. U.S. U.S. U.S. Canada U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Australia Canada Canada Canada U.K. U.K. U.S. U.S. U.S. Metropolitan Market Osaka-Kobe-Kyoto* Anchorage, AK El Paso, TX Fayetteville, AR-MO Greensboro, NC Jackson, MS Knoxville, TN McAllen, TX Ogden, UT Philadelphia, PA-NJ-DE-MD Roanoke, VA Salisbury, MD Virginia Beach-Norfolk, VA-NC Kingston, ON Winnipeg, MB Manchester, NH Raleigh, NC Trenton, NJ Edmonton, AB Cork Falkirk Birmingham, AL Chattanooga, TN-GA Houston, TX Ocala, FL Pensacola, FL Waco, TX Saskatoon, SK Baton Rouge, LA Charlotte, NC-SC Chicago, IL Dallas-Fort Worth, TX Greenville, SC Lakeland, FL Nashville, TN San Antonio, TX Worcester, MA Rockhampton, QLD Belleville, ON Ottawa-Gatineau, ON-QC Whitehorse, YT Dundee Glasgow Albuquerque, NM Kennewick, WA Madison, WI Median Multiple 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.6 3.6 3.6 3.6 3.6 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 Rank 130 140 140 140 140 140 140 140 147 147 147 147 147 147 147 147 147 147 147 158 158 158 158 158 158 158 158 158 167 167 167 167 167 167 167 167 167 176 176 176 176 176 181 181 181 181 Nation U.S. Ireland U.K. U.K. U.S. U.S. U.S. U.S. Australia Canada Canada U.K. U.K. U.K. U.S. U.S. U.S. U.S. U.S. Australia U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Australia U.K. U.K. U.K. U.S. U.S. U.S. U.S. U.S. Canada U.K. U.K. U.S. U.S. Canada N.Z. U.K. U.K. Metropolitan Market Springfield, MA Galway Belfast Swansea Ann Arbor, MI Jacksonville, FL Richmond, VA Tallahassee, FL Mackay, QLD Calgary, AB London, ON Aberdeen Blackpool & Lancashire Sheffield & South Yorkshire Austin, TX Boise, ID Daytona Beach, FL New Orleans, LA Shreveport, LA Townsville, QLD Milwaukee, WI Olympia, WA Palm Bay, FL Phoenix, AZ Provo, UT Salt Lake City, UT Spokane, WA Washington, DC-VA-MD-WV Darwin, NT Derby & Derbyshire Leeds & West Yorkshire Liverpool & Merseyside Bremerton, WA Myrtle Beach, SC Portland, ME Tampa-St. Petersburg, FL Tucson, AZ Kamloops. BC Middlesbrough & Durham Newcastle & Tyneside Cape Coral, FL Colorado Springs, CO Montréal, QC Palmerston North-Manawatu Cardiff Edinburgh 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) Median Multiple 3.9 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.4 4.4 4.4 4.4 4.4 4.5 4.5 4.5 4.5 37 SCHEDULE 2 ALL HOUSING MARKETS RANKED BY AFFORDABILITY: Most Affordable to Least Affordable Median Multiple (Median House Price/Median Household Income): 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey Rank 181 181 181 181 181 181 191 191 191 191 191 191 191 191 191 191 201 202 202 202 202 202 202 202 202 202 202 212 212 214 214 214 217 218 218 218 218 218 218 224 224 226 226 226 226 226 Nation U.K. U.K. U.S. U.S. U.S. U.S. Australia Canada U.K. U.K. U.K. U.S. U.S. U.S. U.S. U.S. U.S. Ireland Japan Singapore U.K. U.K. U.S. U.S. U.S. U.S. U.S. Canada U.S. Australia U.K. U.S. U.S. Canada U.K. U.K. U.S. U.S. U.S. U.S. U.S. Australia Australia Australia N.Z. N.Z. Metropolitan Market Perth Stoke on Trent & Staffordshire Bridgeport, CT Charleston, SC Fort Walton Beach, FL Providence, RI-MA Alice Springs, NT Peterborough, ON Manchester & Greater Manchester Newport Nottingham & Nottinghamshire Bakersfield, CA Durham, NC Gainesville, FL Orlando, FL Port St. Lucie, FL Las Vegas, NV Dublin Tokyo-Yokohama* Singapore Hull & Humber Warrington & Cheshire Asheville, NC Laredo, TX Salem, OR Visalia, CA Wilmington, NC Brantford, ON Greeley, CO Toowoomba, QLD Birmingham & West Midlands Sarasota, FL Fort Collins, CO St. Catharines-Niagara, ON Leicester & Leicestershire Telford & Shropshire College Station, TX Fresno, CA Merced, CA Modesto, CA Sacramento, CA Ballarat, VIC Bendigo, VIC Bundaberg, QLD Christchurch Dunedin Median Multiple 4.5 4.5 4.5 4.5 4.5 4.5 4.6 4.6 4.6 4.6 4.6 4.6 4.6 4.6 4.6 4.6 4.7 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.9 4.9 5.0 5.0 5.0 5.1 5.2 5.2 5.2 5.2 5.2 5.2 5.3 5.3 5.4 5.4 5.4 5.4 5.4 Rank 231 231 231 231 231 231 231 238 238 238 238 238 243 243 243 246 246 246 246 250 250 250 253 253 255 256 257 257 257 260 260 260 263 263 265 265 267 268 269 270 271 271 273 274 275 275 Nation Canada Canada N.Z. U.S. U.S. U.S. U.S. Canada U.K. U.S. U.S. U.S. Australia U.K. U.S. Australia Australia Canada U.S. Canada U.K. U.S. N.Z. U.K. Australia Australia Australia N.Z. U.S. Australia Canada Canada Canada U.K. U.K. U.S. Australia Canada U.K. U.S. Canada U.S. Canada Canada U.S. U.S. Metropolitan Market Cambridge, ON Kitchener-Waterloo, ON Wellington Boston, MA-NH Eugene, OR Portland, OR-WA Vallejo, CA Oshawa, ON Warwickshire Denver, CO New York, NY-NJ-PA Riverside-San Bernardino, CA Canberra, ACT Northampton & Northamptonshire Stockton, CA Cairns, QLD Perth, WA Barrie, ON Seattle, WA Guelph, ON Swindon & Wiltshire Reno, NV Napier-Hastings Plymouth & Devon Hobart, TAS Brisbane, QLD Fraser Coast, QLD Hamilton-Waikato Miami, FL Adelaide, SA Hamilton, ON Kelowna, BC Chilliwack Bristol-Bath London Exurbs (E & SE England) Naples, FL Geelong, VIC Nanaimo, BC Bournemouth & Dorsett Boulder, CO Fraser Valley Oxnard, CA Toronto, ON Victoria, BC San Luis Obispo, CA Santa Rosa, CA 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) Median Multiple 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.7 5.7 5.7 5.7 5.7 5.8 5.8 5.8 5.9 5.9 5.9 5.9 6.0 6.0 6.0 6.1 6.1 6.2 6.3 6.5 6.5 6.5 6.6 6.6 6.6 6.8 6.8 6.9 6.9 7.1 7.2 7.3 7.4 7.7 7.7 7.9 8.1 8.3 8.3 38 SCHEDULE 2 ALL HOUSING MARKETS RANKED BY AFFORDABILITY: Most Affordable to Least Affordable Median Multiple (Median House Price/Median Household Income): 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey Rank 277 277 279 279 281 282 283 283 285 Nation Australia U.S. Australia U.K. N.Z. N.Z. U.S. U.S. U.S. Metropolitan Market Gold Coast, QLD-NSW San Diego, CA Sunshine Coast, QLD London (Greater London Authority) Auckland Taraunga-Western Bay of Plenty Salinas-Monterey, CA San Francisco, CA Honolulu, HI Median Multiple 8.4 8.4 8.5 8.5 8.8 8.9 9.1 9.1 9.2 Median Rank Nation Metropolitan Market Multiple 286 U.S. Los Angeles, CA 9.4 286 U.S. Santa Barbara, CA 9.4 288 Australia Melbourne, VIC 9.9 289 U.S. San Jose, CA 10.3 290 U.S. Santa Cruz, CA 10.4 291 Canada Vancouver, BC 12.6 292 Australia Sydney, NSW 12.9 293 China Hong Kong 19.4 Median Multiple: Median house price divided by median household income 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 39 SCHEDULE 3 ALL HOUSING MARKETS BY NATION: 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey International Affordability Rank 260 191 226 226 256 226 246 243 167 257 267 72 277 255 147 288 246 130 279 292 214 158 246 130 212 147 231 24 16 16 263 111 4 271 4 250 85 260 176 260 106 231 80 147 2 181 268 238 130 191 Major Market Rank 77 75 88 72 91 35 23 51 31 National Rank 17 6 8 8 15 8 12 11 5 16 18 1 19 14 3 21 12 2 20 22 7 4 37 24 32 27 34 7 5 5 41 22 2 43 2 38 17 39 29 39 20 34 15 27 1 30 42 36 24 31 Nation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Housing market Adelaide, SA Alice Springs, NT Ballarat, VIC Bendigo, VIC Brisbane, QLD Bundaberg, QLD Cairns, QLD Canberra, ACT Darwin, NT Fraser Coast, QLD Geelong, VIC Gladstone, QLD Gold Coast, QLD-NSW Hobart, TAS Mackay, QLD Melbourne, VIC Perth, WA Rockhampton, QLD Sunshine Coast, QLD Sydney, NSW Toowoomba, QLD Townsville, QLD Median Market filler Barrie, ON Belleville, ON Brantford, ON Calgary, AB Cambridge, ON Cape Breton, NS Charlottetown, PEI Chatham, ON Chilliwack Edmonton, AB Fort McMurray, AB Fraser Valley Fredericton, NB Guelph, ON Halifax, NS Hamilton, ON Kamloops. BC Kelowna, BC Kingston, ON Kitchener-Waterloo, ON Lethbridge, AB London Moncton, NB Montréal, QC Nanaimo, BC Oshawa, ON Ottawa-Gatineau, ON-QC Peterborough, ON Median Multiple* 6.6 4.6 5.4 5.4 6.3 5.4 5.9 5.8 4.3 6.5 7.1 3.2 8.4 6.2 4.1 9.9 5.9 3.9 8.5 12.9 5.0 4.2 5.9 Median Price $450,000 $476,500 $337,000 $334,500 $516,900 $280,000 $410,000 $640,000 $495,000 $310,000 $492,000 $279,500 $601,850 $426,300 $307,300 $817,000 $504,300 $264,500 $560,000 $1,177,600 $343,500 $316,300 Median Household Income $68,500 $102,800 $62,200 $62,300 $81,700 $51,900 $70,000 $110,500 $115,600 $47,400 $69,100 $88,300 $71,300 $68,600 $75,700 $82,800 $86,200 $68,500 $66,100 $91,600 $68,200 $75,400 5.9 3.9 4.9 4.1 5.5 2.7 2.6 2.6 6.8 3.7 2.2 7.7 2.2 6.0 3.4 6.6 4.4 6.6 3.6 5.5 3.3 4.1 2.1 4.5 7.2 5.7 3.9 4.6 $490,900 $255,400 $345,900 $420,100 $442,800 $149,900 $175,300 $154,200 $471,400 $358,200 $434,700 $627,100 $155,100 $505,900 $249,800 $513,800 $342,000 $495,300 $265,800 $438,700 $254,800 $278,300 $139,400 $294,600 $479,500 $502,400 $335,100 $306,900 $83,800 $66,300 $71,300 $101,600 $80,100 $55,900 $66,800 $60,300 $69,100 $96,400 $197,400 $81,200 $69,500 $84,200 $73,500 $78,300 $77,200 $74,900 $73,800 $80,100 $77,000 $67,100 $65,300 $65,200 $66,200 $88,900 $85,500 $67,200 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 40 SCHEDULE 3 ALL HOUSING MARKETS BY NATION: 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey International Affordability Rank 85 80 72 24 8 52 120 92 218 72 63 273 24 291 274 130 52 106 Major Market Rank 293 92 111 202 140 4 24 81 90 59 National Rank 17 15 13 7 4 10 23 19 33 13 12 44 7 46 45 24 10 20 Nation Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada 1 China 3 5 4 1 2 Ireland Ireland Ireland Ireland Ireland 202 92 59 19 2 1 Japan Japan 281 226 226 257 253 181 282 231 84 7 2 2 6 5 1 8 4 N.Z. N.Z. N.Z. N.Z. N.Z. N.Z. N.Z. N.Z. 202 59 1 Singapore 64 35 80 78 6 4 23 6 32 30 14 9 U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. 147 140 214 147 269 263 181 167 44 Housing market Québec, QC Red Deer, AB Regina, SK Saguenay, QC Saint John, NB Sarnia, ON Saskatoon, SK Sherbrooke, QC St. Catharines-Niagara, ON St. John's, NL Thunder Bay, ON Toronto, ON Trois-Rivières, QC Vancouver, BC Victoria, BC Whitehorse, YT Windsor, ON Winnipeg, MB Median Market filler Hong Kong filler Cork Dublin Galway Limerick Waterford Median Market filler Tokyo-Yokohama* Osaka-Kobe-Kyoto* Median Market* filler Auckland Christchurch Dunedin Hamilton-Waikato Napier-Hastings Palmerston North-Manawatu Taraunga-Western Bay of Plenty Wellington Median Market filler Singapore Filler Aberdeen Belfast Birmingham & West Midlands Blackpool & Lancashire Bournemouth & Dorsett Bristol-Bath Cardiff Derby & Derbyshire Median Multiple* 3.4 3.3 3.2 2.7 2.3 3.0 3.8 3.5 5.2 3.2 3.1 7.9 2.7 12.6 8.1 3.9 3.0 3.6 3.9 Median Price $236,500 $285,700 $283,600 $169,000 $153,200 $220,600 $330,100 $198,700 $348,200 $264,300 $220,500 $645,800 $145,100 $927,300 $601,600 $385,700 $204,800 $268,300 Median Household Income $69,000 $87,500 $89,000 $62,500 $66,200 $73,400 $87,500 $56,700 $66,500 $81,600 $71,000 $81,300 $54,700 $73,400 $74,000 $99,700 $68,400 $74,100 19.4 $6,192,000 $319,000 3.7 4.8 4.0 2.2 2.7 3.7 €202,000 €300,000 €197,000 €120,000 €136,400 €54,600 €63,000 €49,200 €55,800 €51,300 4.8 3.5 4.2 ¥32,668,000 ¥20,814,000 ¥6,841,000 ¥5,988,000 8.8 5.4 5.4 6.5 6.1 4.5 8.9 5.5 5.8 $836,700 $448,300 $363,300 $530,100 $409,100 $278,000 $617,000 $508,700 $94,800 $83,700 $67,400 $81,800 $67,000 $62,000 $69,100 $92,100 4.8 $413,700 $85,400 4.1 4.0 5.0 4.1 7.3 6.8 4.5 4.3 £183,100 £129,700 £160,000 £135,000 £280,000 £270,000 £156,000 £158,000 £44,400 £32,100 £32,100 £33,000 £38,100 £39,900 £34,900 £37,000 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 41 SCHEDULE 3 ALL HOUSING MARKETS BY NATION: 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey International Affordability Rank 130 181 111 130 202 167 218 167 279 265 191 176 176 191 243 191 181 253 147 181 140 250 218 202 238 24 72 130 63 41 92 140 202 72 80 147 191 85 120 63 111 147 231 270 167 181 72 33 16 176 10 Major Market Rank 51 31 59 44 65 44 83 79 55 49 49 55 74 35 51 59 14 35 16 23 67 4 National Rank 2 14 1 2 21 9 24 9 33 31 18 12 12 18 27 18 14 29 6 14 4 28 24 21 26 Nation U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. 17 58 101 50 30 71 105 139 58 63 109 133 66 92 50 86 109 152 164 122 129 58 22 11 127 5 U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Housing market Dundee Edinburgh Falkirk Glasgow Hull & Humber Leeds & West Yorkshire Leicester & Leicestershire Liverpool & Merseyside London (Greater London Authority) London Exurbs (E & SE England) Manchester & Greater Manchester Middlesbrough & Durham Newcastle & Tyneside Newport Northampton & Northamptonshire Nottingham & Nottinghamshire Perth Plymouth & Devon Sheffield & South Yorkshire Stoke on Trent & Staffordshire Swansea Swindon & Wiltshire Telford & Shropshire Warrington & Cheshire Warwickshire Median Market filler Akron, OH Albany, NY Albuquerque, NM Allentown, PA Amarillo, TX Anchorage, AK Ann Arbor, MI Asheville, NC Atlanta, GA Atlantic City, NJ Austin, TX Bakersfield, CA Baltimore, MD Baton Rouge, LA Beaumont, TX Birmingham, AL Boise, ID Boston, MA-NH Boulder, CO Bremerton, WA Bridgeport, CT Brownsville, TX Buffalo, NY Canton, OH Cape Coral, FL Cedar Rapids, IA Median Multiple* 3.9 4.5 3.7 3.9 4.8 4.3 5.2 4.3 8.5 6.9 4.6 4.4 4.4 4.6 5.8 4.6 4.5 6.1 4.1 4.5 4.0 6.0 5.2 4.8 5.7 4.5 Median Price £133,500 £182,600 £125,000 £135,600 £150,000 £143,000 £185,000 £138,500 £463,000 £300,000 £152,500 £111,000 £135,000 £161,000 £207,000 £152,000 £177,000 £220,000 £132,000 £159,700 £127,500 £240,000 £182,500 £192,500 £234,000 Median Household Income £34,400 £40,500 £33,600 £34,700 £31,300 £32,900 £35,500 £31,900 £54,200 £43,400 £33,100 £25,300 £30,900 £34,900 £35,500 £32,800 £39,500 £35,900 £31,900 £35,200 £31,500 £39,900 £35,200 £40,100 £41,200 2.7 3.2 3.9 3.1 2.9 3.5 4.0 4.8 3.2 3.3 4.1 4.6 3.4 3.8 3.1 3.7 4.1 5.5 7.4 4.3 4.5 3.2 2.8 2.6 4.4 2.4 $144,100 $216,100 $201,600 $197,800 $162,700 $294,000 $268,200 $251,000 $204,300 $191,600 $296,400 $234,900 $270,000 $203,500 $157,800 $198,700 $232,200 $464,100 $563,500 $301,000 $419,300 $123,000 $151,600 $137,200 $240,000 $156,500 $52,800 $67,500 $52,200 $64,500 $55,800 $84,200 $67,200 $51,800 $64,100 $58,200 $72,700 $51,100 $78,600 $53,800 $50,600 $53,500 $56,500 $84,400 $76,400 $70,800 $92,300 $38,000 $54,800 $52,000 $54,200 $64,900 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 42 SCHEDULE 3 ALL HOUSING MARKETS BY NATION: 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey International Affordability Rank 181 120 111 120 24 24 218 176 63 63 85 120 10 24 147 238 41 41 41 191 92 14 231 92 41 52 217 181 218 16 191 52 212 41 92 120 41 52 33 72 285 111 72 52 92 140 33 63 130 63 92 120 52 Major Market Rank 26 26 2 2 11 26 69 7 9 14 86 23 9 33 11 National Rank 129 92 86 92 17 17 147 127 50 50 66 92 5 17 109 156 30 30 30 133 71 9 152 71 30 41 146 129 147 11 133 41 144 30 71 92 30 41 22 58 171 86 58 41 71 105 22 50 101 50 71 92 41 Nation U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Housing market Charleston, SC Charlotte, NC-SC Chattanooga, TN-GA Chicago, IL Cincinnati, OH-KY-IN Cleveland, OH College Station, TX Colorado Springs, CO Columbia, SC Columbus, OH Corpus Christi, TX Dallas-Fort Worth, TX Davenport, IA-IL Dayton, OH Daytona Beach, FL Denver, CO Des Moines, IA Detroit, MI Duluth, MN Durham, NC El Paso, TX Erie, PA Eugene, OR Fayetteville, AR-MO Fayetteville, NC Flint, MI Fort Collins, CO Fort Walton Beach, FL Fresno, CA Ft. Wayne, IN Gainesville, FL Grand Rapids, MI Greeley, CO Green Bay, WI Greensboro, NC Greenville, SC Gulfport, MS Hagerstown, MD-WV Harrisburg, PA Hartford, CT Honolulu, HI Houston, TX Huntsville, AL Indianapolis, IN Jackson, MS Jacksonville, FL Kalamazoo, MI Kansas City, MO-KS Kennewick, WA Killeen , TX Knoxville, TN Lakeland, FL Lancaster, PA Median Multiple* 4.5 3.8 3.7 3.8 2.7 2.7 5.2 4.4 3.1 3.1 3.4 3.8 2.4 2.7 4.1 5.7 2.9 2.9 2.9 4.6 3.5 2.5 5.5 3.5 2.9 3.0 5.1 4.5 5.2 2.6 4.6 3.0 4.9 2.9 3.5 3.8 2.9 3.0 2.8 3.2 9.2 3.7 3.2 3.0 3.5 4.0 2.8 3.1 3.9 3.1 3.5 3.8 3.0 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) Median Price $267,100 $233,200 $178,100 $255,600 $169,100 $146,000 $227,000 $283,900 $165,100 $193,900 $188,900 $249,000 $129,300 $142,500 $195,000 $418,100 $198,200 $167,600 $151,000 $262,200 $152,800 $123,300 $270,500 $183,700 $134,300 $133,000 $350,000 $269,900 $260,700 $135,500 $214,600 $182,400 $321,000 $170,600 $163,800 $199,500 $137,600 $172,900 $174,400 $238,700 $760,200 $233,900 $192,000 $173,700 $180,600 $232,000 $150,000 $197,800 $246,300 $164,000 $180,200 $180,900 $190,000 Median Household Income $59,100 $61,400 $47,700 $67,600 $61,700 $53,400 $43,300 $65,200 $53,500 $61,800 $55,100 $65,400 $53,900 $52,700 $47,200 $73,700 $67,300 $57,500 $52,500 $57,500 $43,100 $50,200 $48,900 $53,100 $46,400 $45,000 $68,100 $60,000 $49,900 $52,800 $46,400 $61,700 $64,900 $59,400 $47,300 $51,900 $47,600 $57,200 $63,000 $74,300 $82,500 $63,200 $59,600 $58,100 $51,900 $58,200 $53,300 $62,900 $62,500 $53,500 $51,100 $47,500 $62,800 43 SCHEDULE 3 ALL HOUSING MARKETS BY NATION: 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey International Affordability Rank 16 202 201 52 52 24 286 63 130 106 92 85 218 257 158 85 41 224 52 167 265 120 85 33 147 238 111 92 33 158 33 191 271 158 111 4 92 158 33 191 167 231 181 158 106 41 250 140 238 92 Major Market Rank 16 10 224 1 58 87 11 16 76 40 16 26 35 69 4 55 19 40 4 67 51 22 33 69 66 National Rank 11 139 138 41 41 17 172 50 101 83 71 66 147 162 114 66 30 150 41 122 163 92 66 22 109 156 86 71 22 114 22 133 165 114 86 3 71 114 22 133 122 152 129 114 83 30 161 105 156 71 Nation U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Housing market Lansing, MI Laredo, TX Las Vegas, NV Lexington, KY Lincoln, NE Little Rock, AR Los Angeles, CA Louisville, KY-IN Madison, WI Manchester, NH McAllen, TX Memphis, TN-MS-AR Merced, CA Miami, FL Milwaukee, WI Minneapolis-St. Paul, MN-WI Mobile, AL Modesto, CA Montgomery, AL Myrtle Beach, SC Naples, FL Nashville, TN New Haven, CT New London, CT New Orleans, LA New York, NY-NJ-PA Ocala, FL Ogden, UT Oklahoma City, OK Olympia, WA Omaha, NE-IA Orlando, FL Oxnard, CA Palm Bay, FL Pensacola, FL Peoria, IL Philadelphia, PA-NJ-DE-MD Phoenix, AZ Pittsburgh, PA Port St. Lucie, FL Portland, ME Portland, OR-WA Providence, RI-MA Provo, UT Raleigh, NC Reading, PA Reno, NV Richmond, VA Riverside-San Bernardino, CA Roanoke, VA 11 5 150 U.S. U.S. U.S. Rochester, NY Rockford, IL Sacramento, CA Median Multiple* 2.6 4.8 4.7 3.0 3.0 2.7 9.4 3.1 3.9 3.6 3.5 3.4 5.2 6.5 4.2 3.4 2.9 5.3 3.0 4.3 6.9 3.8 3.4 2.8 4.1 5.7 3.7 3.5 2.8 4.2 2.8 4.6 7.7 4.2 3.7 2.2 3.5 4.2 2.8 4.6 4.3 5.5 4.5 4.2 3.6 2.9 6.0 4.0 5.7 3.5 Median Price $142,400 $177,000 $261,600 $168,000 $183,100 $143,700 $636,000 $175,700 $273,600 $284,800 $131,000 $172,700 $256,700 $340,000 $246,900 $257,800 $134,300 $295,400 $145,700 $205,800 $429,900 $234,300 $231,400 $203,400 $204,300 $419,100 $150,000 $253,000 $158,800 $284,000 $179,000 $247,900 $632,500 $220,000 $192,300 $128,700 $238,900 $248,900 $159,000 $229,900 $276,400 $389,400 $287,000 $295,000 $267,500 $174,400 $355,900 $258,900 $339,900 $181,000 Median Household Income $54,600 $36,500 $55,700 $55,100 $60,800 $52,700 $67,500 $55,900 $70,200 $78,100 $37,100 $51,000 $48,900 $52,600 $59,400 $75,000 $46,900 $55,600 $48,400 $47,900 $62,700 $61,500 $67,800 $72,400 $50,000 $73,600 $40,300 $71,900 $56,400 $67,400 $63,800 $53,700 $82,100 $52,400 $51,700 $58,500 $67,600 $59,500 $57,400 $49,900 $65,000 $70,300 $63,400 $71,000 $73,400 $60,700 $59,500 $64,500 $59,600 $51,800 2.6 2.4 5.3 $145,700 $122,200 $350,000 $56,500 $51,500 $65,600 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 44 SCHEDULE 3 ALL HOUSING MARKETS BY NATION: 2017: Third Quarter 14th Annual Demographia International Housing Affordability Survey International Affordability Rank 41 202 283 92 158 120 277 283 289 275 286 290 275 214 8 246 147 52 16 80 158 130 41 243 10 140 167 16 106 167 63 2 231 92 202 111 158 14 202 80 120 33 1 Major Market Rank 7 40 26 82 85 89 72 44 44 19 40 National Rank 30 139 169 71 114 92 168 169 174 166 172 175 166 145 4 160 109 41 11 63 114 101 30 159 5 105 122 11 83 122 50 2 152 71 139 86 114 9 139 63 92 22 1 Nation U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Housing market Saint Louis, MO-IL Salem, OR Salinas-Monterey, CA Salisbury, MD Salt Lake City, UT San Antonio, TX San Diego, CA San Francisco, CA San Jose, CA San Luis Obispo, CA Santa Barbara, CA Santa Cruz, CA Santa Rosa, CA Sarasota, FL Scranton-Wilkes Barre, PA Seattle, WA Shreveport, LA Sioux Falls, SD South Bend, IN Spartanburg, SC Spokane, WA Springfield, MA Springfield, MO Stockton, CA Syracuse, NY Tallahassee, FL Tampa-St. Petersburg, FL Toledo, OH Trenton, NJ Tucson, AZ Tulsa, OK Utica, NY Vallejo, CA Virginia Beach-Norfolk, VA-NC Visalia, CA Waco, TX Washington, DC-VA-MD-WV Wichita, KS Wilmington, NC Winston-Salem, NC Worcester, MA York, PA Youngstown, OH-PA Median Market Median Multiple* 2.9 4.8 9.1 3.5 4.2 3.8 8.4 9.1 10.3 8.3 9.4 10.4 8.3 5.0 2.3 5.9 4.1 3.0 2.6 3.3 4.2 3.9 2.9 5.8 2.4 4.0 4.3 2.6 3.6 4.3 3.1 2.1 5.5 3.5 4.8 3.7 4.2 2.5 4.8 3.3 3.8 2.8 1.9 3.7 Median Price $176,500 $274,200 $593,100 $195,000 $293,000 $220,700 $607,000 $900,000 $1,165,000 $598,800 $649,700 $828,300 $630,200 $273,600 $110,000 $478,500 $171,800 $196,500 $132,900 $157,300 $229,200 $217,300 $134,900 $353,300 $136,700 $207,000 $225,000 $128,400 $287,700 $210,000 $163,800 $115,000 $417,500 $224,000 $224,900 $175,000 $408,500 $138,400 $246,200 $159,400 $265,600 $177,700 $88,900 Median Household Income $61,200 $57,300 $65,400 $56,100 $69,800 $57,500 $72,500 $99,000 $112,700 $72,300 $69,100 $79,500 $75,700 $54,900 $48,600 $80,500 $41,400 $65,500 $50,300 $47,700 $54,200 $56,200 $46,400 $61,000 $58,100 $51,900 $52,400 $50,000 $79,500 $48,700 $52,900 $53,800 $75,700 $63,300 $47,000 $47,700 $98,200 $55,000 $51,400 $48,900 $69,400 $64,000 $46,100 Financial data in local currency. *Average Multiple (Japan) 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 45 ANNEX: USES, METHODS AND SOURCES Most international housing affordability sources and "city" rating sources focus on higher end housing that would be demanded by executives who might be transferred from one nation to another (expatriates). The Demographia International Housing Affordability Survey is unique in focusing on the middle of the market --- housing affordability for average households. Further, the focus is on housing markets, rather than higher-cost inner areas or expensive neighborhoods. This is an important distinction. The data in the Demographia International Housing Affordability Survey does not relate, for example to Belgravia in London, New York's Upper East Side or Beverly Hills in Los Angeles. It rather encompasses entire metropolitan markets, which for example, in the New York metropolitan area includes more than 20 counties in the states of New York, New Jersey and Pennsylvania79 (where included housing can be 75 miles [120 kilometers] or more from the upscale areas of the urban core, where prices are the highest). Geographical Coverage: The nine nations and corresponding housing markets that are included in the 13th Annual Demographia International Housing Affordability Survey have sufficient current sources of house prices and household income data to estimate housing affordability using the Median Multiple (the similar "Average Multiple” is used in Japan). Demographia receives periodic requests to expand its coverage to other nations. The addition of continental European nations, mainland China and India has been most frequently requested. Demographia would be pleased to add other nations and will do so wherever consistent data of sufficient quality can be identified. Readers are encouraged to contact the authors with any such information. House Characteristics: The indexes and data on which the Survey is based reflect the majority of existing housing in each of the national markets. At the same time, there are differences in house types, housing characteristics and lot size between the geographies covered. The Demographia International Housing Affordability Survey does not adjust the Median Multiples to reflect these differences. For example, the average size of housing, particularly new housing, is abnormally small by New World standards in the United Kingdom and Hong Kong.80 Methods: Median house price information is obtained from leading metropolitan reporting agencies and includes the housing stock as reported upon. Where only average house prices are available, median house prices are estimated from historic conversion factors, except in Japan. The principal sources are real estate time series that have become established as authoritative, national sales transaction registries and other government sources. Median household income data is estimated for each housing markets using national census data or housing market data from other national surveys. The income base is then adjusted to account for 79 80 As defined by the United States Bureau of Management and the Budget. See 2nd Annual Demographia International Housing Affordability Survey, Pages 16-18. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 46 changes to produce an up-to-date estimate, using the best available indicators of annual income changes. This requires periodic recalibration of base year data to reflect the latest available data. For the 2018 edition, recalibrations occurred in Australia and Canada, due to new census data, New Zealand due to a government restatement of household incomes and the United Kingdom. Caution is urged in time-series comparisons in individual markets. Changes in data sources, base year income information, housing data sources and geographical definitions can make precise year to year comparisons less reliable. Comparisons should be generally limited to the housing affordability rating categories of "affordable," moderately unaffordable," "seriously unaffordable" and "severely unaffordable."81 Sources: The following principal sources have been consulted: Arkansas Realtors Association Australian Bureau of Statistics Australian Property Monitors Bank of Canada Bank of England Bank of Ireland Calgary Real Estate Board Canada Mortgage and Housing Corporation Canadian Home Builders Association Canadian Real Estate Association Census and Statistical Office: Government of Hong Kong Central Statistics Office, Ireland Chambre immobilière du Grand Montréal Communities and Local Government (Ministry), United Kingdom Conference Board of Canada Department of the Environment, Heritage and Local Government (Ireland) Domain.com.au (Australia) Edmonton Real Estate Board Federal Reserve Board (United States) Fédération des chambres immobilières du Québec Harvard University Joint Center on Housing Housing and Development Board (Singapore) Housing Industry Association (Australia) Ireland Environment, Heritage and Local Government Japan Statistics Bureau John Burns Real Estate Consulting The Land Institute of Japan Land Registry of England and Wales 81 Demographia attempts to use the most reliable available data at the time of report preparation. This necessitates adopting more representative sources as they become available, including new sources and updates. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 47 The Land Registry (Hong Kong) Michigan Realtors National Association of Home Builders (USA) National Association of Realtors (USA) National Statistics (United Kingdom) Northern Ireland Research and Statistics Agency Real Estate Institute of Australia Real Estate Institute of New South Wales Real Estate Institute of New Zealand Real Estate Institute of Northern Territory Real Estate Institute of Queensland Real Estate Institute of Tasmania Real Estate Institute of Victoria Real Estate Institute of Western Australia Realestateview.com.au Registers of Scotland Reserve Bank of Australia Reserve Bank of New Zealand Residential Property Price Register of the Property Services Regulatory Authority (Ireland) realestate.com.au Singapore Department of Statistics Singapore Real Estate Exchange (SRX) Statistics Canada Statistics New Zealand Title Guaranty Hawaii Toronto Real Estate Board United Kingdom Department of Communities and Local Government United States Department of Commerce: Bureau of Economic Analysis United States Department of Commerce: Bureau of the Census United States Department of Housing and Urban Development Urban Development Institute of Australia Yukon Government Wells Fargo Bank Zillow.com Expanded Notes on Selected Figures: Figure 2: House Price-to-Income Ratios: Reserve Bank of Australia data. Figure courtesy of Frontier Centre for Public Policy (https://www.fcpp.org/posts/housing-affordability-and-thestandard-of-living-in-toronto) Figure 4: Housing Affordability & Land Regulation: In the United States, more restrictive regulation markets (Table 1) include those classified as “growth management,” “growth control,” 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 48 “containment” and “contain-lite” in From Traditional to Reformed A Review of the Land Use Regulations in the Nation’s 50 largest Metropolitan Areas (Brookings Institution, 2006) as well as additional markets Demographia has determined other U.S. metropolitan areas to have urban containment policy or other policies that have similar effects (New York, Boston, Chicago, Minneapolis-St. Paul, Washington and Honolulu). Outside the United States, more restrictively regulated markets are identified based upon the extent of their use of urban containment strategies (significant restriction or prohibition of urban fringe development). This includes all markets in the United Kingdom (principally under the Town and Country Planning Act), Ireland (under the National Spatial Strategy), Hong Kong and all of the markets of Australia and New Zealand. In Canada, urban containment policy has been adopted in Toronto, Montréal, Vancouver, Ottawa and Calgary. Markets not classified as more restrictively regulated are classified as liberal (see Table 3). Figure 10: Middle-Income Housing Affordability: New Zealand: Median Multiple values for 2014 through 2016 scaled using change rate from 2013 to 2017. Figure 14: Impact of Housing on Cost of Living: This analysis compares 2016 costs of living for households moving to metropolitan areas and the corresponding Median Multiples, weighted by the national home ownership versus rental share. The calculation assumes the home buying household has the median income and purchases the median priced house at typical purchase conditions. See Center for Opportunity Urbanism (2017), COU Standard of Living Index. Based on analysis of cost of living data from the U.S. Department of Commerce, Bureau of Economic Analysis. Table 11 Housing Market Selection Criteria Nation Markets Included (Where Sufficient Data is Available) Australia Housing markets corresponding to urban centres over 50,000 population Canada Housing markets over 75,000 population China Hong Kong Ireland Housing markets over 50,000 population Japan Two largest markets (only markets available) New Zealand Markets corresponding to urban areas over 75,000 population Singapore Singapore United Kingdom Markets corresponding to urban areas over 150,000 population and London Exurbs (E & SE England). United States Housing markets over 250,000 population Selected additional markets. Housing markets are generally metropolitan areas (labour market areas) or their equivalent. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 49 Footer Illustrations: New Houses (Left to Right): Suburban Kansas City, United States Suburban Montréal, Canada East of England (London Exurbs), United Kingdom Suburban Tseung Kwan O (Hong Kong) Suburban Dublin, Ireland Suburban Auckland, New Zealand Suburban Adelaide, Australia 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 50 AUTHOR BIOGRAPHIES Wendell Cox Wendell Cox is co-author of the Demographia International Housing Affordability Survey. He is a public policy consultant and principal of Demographia, an international public policy firm.. He is a senior fellow at the Center for Opportunity Urbanism (Houston), senior fellow for housing affordability and municipal policy at the Frontier Centre for Public Policy (Winnipeg) and a member of the advisory board of the Center for Demographics and Policy at Chapman University in California. Wendell Cox has also served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris (a national university). He has served as vice-president of CODATU, a Lyon (France) based international research organization dedicated to improving transport in developing world urban areas. He is author of the Evolving Urban Form series at newgeography.com. He authored the "Measuring Urban Cores and Suburbs" chapter in the Massachusetts Institute of Technology volume Infinite Suburbia, published by the Princeton Architectural Press. Among his most recent policy reports were A Question of Values: Urban Containment Policy and Middle-Income Housing Affordability, Canada’s Middle-Income Housing Affordability Crisis, Restrictive Land-Use Regulation: Strategies, Effects and Solutions, and Improving the Competitiveness of Metropolitan Areas for the Frontier Centre for Public Policy, Putting People First: An Alternative Perspective with and Evaluation of the NCE Cities “Trillion Dollar” Report, Best Cities for Minorities: Gauging the Economics of Opportunity (co-author with Joel Kotkin) for the Center for Opportunity Urbanism, for the Frontier Centre for Public Policy Evaluation of Plan Bay Area for the Pacific Research Institute and a "framing essay" entitled Toward More Prosperous Cities. Wendell Cox has lectured widely, including a month long tour to all Australian state and territory capitals and university lectures in the United Kingdom, France, China, Egypt and Australia. He has also conducted transport and urban planning training seminars in Romania, Togo and Ethiopia, He has completed projects in the United States, Western Europe, Canada, Australia and New Zealand in urban policy, demographics and transport. He was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley and to the Amtrak Reform Council by Speaker of the U. S. House of Representatives Newt Gingrich. Demographia annually publishes Demographia World Urban Areas, the only annual list of world urban areas (agglomerations) over 500,000 population with coordinate urban land area, population and population density estimates. Demographia sponsors demographia.com and www.publicpurpose.com. The www.publicpurpose.com website has been twice honored by the National Journal as one of the nation’s top internet transport sites. He is also author of the Demographia Residential Land and Regulation Cost Index. 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 51 In 2004 he teamed with Hugh Pavletich of Performance Urban Planning to develop the Demographia International Housing Affordability Survey. Hugh Pavletich Hugh Pavletich, the co-author of the Demographia International Housing Affordability Survey, resides in “severely unaffordable” (6.1 Median Multiple) Christchurch, New Zealand, which since 4 September 2010 has experienced in excess of 13,000 earthquakes. He has written extensively on these issues. He operates the archival website Performance Urban Planning and is the Managing Director of Pavletich Properties Ltd, a commercial property development and investment company. He commenced his working life as a farm worker and wool classer (wool classifier) in 1967 and moved to Christchurch in 1980, where he started developing small factory units and has developed commercial and industrial property on freehold and Maori leasehold land in other centers of the South Island as well. His industry involvement commenced when elected President of the South Island Division of the Property Council of New Zealand (then the Building Owners & Managers Association – BOMA) soon after its inception in 1991, which he led for four years. He has had extensive involvement with public policy issues of local authority financial management, land use regulation and heritage. In 2004, he was elected a fellow of the Urban Development Institute of Australia (UDIA) for services to the industry. He felt there was a need for an international measure of housing affordability and teamed up with Wendell Cox in 2004, to develop the annual Demographia International Housing Affordability Survey. Demographia St. Louis Metropolitan Region, United States www.demographia.com demographia2@earthlink.net Contact: Wendell Cox +1.618.632.8507 Performance Urban Planning Christchurch, New Zealand www.performanceurbanplanning.org/ hugh.pavletich@xtra.co.nz Contact: Hugh Pavletich +64.3.343.9944 14th Annual Demographia International Housing Affordability Survey (2017: 3rd Quarter) 52