Housing affordability concerns point to new model, University of Calgary research says

Houses for sale in a new subdivision in Airdrie, Alta., Friday, Jan. 28, 2022. THE CANADIAN PRESS/Jeff McIntosh

Calgary researchers looking into Canada's housing affordability crisis say the current framework used by financial institutions is "an arbitrary relic" and ignores a number of common issues.

The University of Calgary School of Public Policy's report called Measuring the Affordability of Shelter suggests that the current rule of thumb to determine housing affordability – where no more than 30 per cent of income devoted to shelter – is "worrisome" given the current economic climate.

Instead, the study says the Canada Housing and Mortgage Corporation (CMHC) is looking at a new guideline called the housing hardship concept.

"The 30 per cent rule for defining the affordability of shelter is an arbitrary relic from the past," wrote the study's author, Ron Kneebone.

"The Canada Housing and Mortgage Corporation (CMHC) is considering a new concept based on more rigorous analysis."

The new strategy is based on something called the residual income approach, Kneebone says, which stresses that for basic shelter costs to be considered affordable, they can't be so high that "other necessities cannot be afforded."

"Shelter is unique among basic needs in that is absorbs a very large part of an individual's or family's income, and it is hard to adjust the amount of it one consumes," he said. "In a personal financial crisis, meals can be skipped, lights turned off or thermostats turned down.

"But there is relatively little that can be done to save on shelter."

Including data collected in 2017, Kneebone says six per cent of Alberta households are in "hardship," where they cannot afford other basic needs after paying for shelter costs.

The percentage of households in that situation is much higher in Eastern Canada.

"The new measure suggests shelter is more affordable to many more people in Alberta and Ontario than in New Brunswick and in Newfoundland and Labrador," Kneebone said.

Additional work is being done on the new measure, but Kneebone says if it is adopted, it could help direct public policies that address housing affordability for individuals and low-income families.