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Affording a home in today’s market

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Home ownership in 2006 reached its highest level since 1971. However, the rise of house prices in recent years has Canadians in some markets concerned about housing affordability.

Affordability means different things to different people. A commonly used benchmark comes from Canada Mortgage and Housing Corporation: Does the household spend less or more than 30% of its income on shelter costs? Shelter costs include rent or mortgage payments, utilities, property taxes and condo fees.

As of 2006, one in four Canadian households spent 30% or more of their income on shelter—a slight gain from 2001 but lower than the proportion in 1996 following the economic downturn in the early 1990s.

Fifty-one percent of the households that exceeded the benchmark in 2006 were renters, 41% were homeowners with a mortgage, and the rest were households that owned a home without a mortgage.

A study on the dynamics of housing affordability found that 3 out of 10 Canadians spent more than 30% of their household income on shelter at some point during the three years from 2002 to 2004. However, only 1 out of 10 persistently spent more than 30% in all three years.

The poorest 40% of Canadians represented 80% of the households that exceeded the budgetary benchmark of housing affordability. Conversely, the richest 40% of Canadians accounted for 7% of the households exceeding the benchmark.

The households most likely to exceed the 30% benchmark were those with people living alone, female lone parents, renters or immigrants. They were also most likely to be living in two of Canada’s most expensive cities: Vancouver and Toronto.