Appendix B Shelter-cost-to-income-ratio (STIR) and the affordabilitystandard

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Owner shelter costs include mortgage payments1, property taxes, condominium fees, and utility payments2 (for heating fuel, water and electricity). Renter shelter costs consist of rent payments plus utilities. Total annual household shelter costs are derived from this information for comparison to total annual before-tax household income. Before-tax income includes transfers from government but does not subtract taxes. Income is collected for each person 16 years of age and over and then aggregated into household income. Approximately 85% of SLID respondents allow the use of their tax data as an alternative to answering the survey questions, thereby improving data quality and reducing response burden.

Households spending less than 30% of their incomes on shelter are classified as meeting the affordability standard. Households spending 30% or more of their incomes on shelter are classified as not meeting the affordability standard but are not necessarily experiencing housing affordability problems. Many who spend a higher percentage of their incomes on shelter do so by choice, and have sufficient income to be able to afford suitable and adequate housing for less than 30% of their incomes in their locality.

The CMHC indicator "Core Housing Need" classifies only those who could not afford suitable and adequate housing in their locality as being in housing need. Based on the application of this indicator to 2001 Census data by CMHC, 20% of households spent more than the housing affordability standard, but only 12% were in core housing need.3 This report looks only at the 30% affordability benchmark.

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  1. The principal portion of a mortgage payment helps to build equity and therefore household wealth. However, the breakdown of mortgage payments into principal and interest is often not known by respondents and is not asked on SLID. Thus, owners with mortgages who spend 30% or more of their income on shelter (i.e., they do not meet the affordability benchmark) are, unlike renters, contributing to their wealth.
  2. Utility costs are imputed onto the SLID database for both renters and owners based on Census data.
  3. Canada Mortgage and Housing Corporation. 2004. 2001 Census Housing Series: Issue 3 Revised - The Adequacy, Suitability, and Affordability of Canadian Housing, Appendix Table 4, p. 9. Research highlights Socio-Economic Series 04-007. Ottawa: Canada Mortgage and Housing Corporation https://www.cmhc-schl.gc.ca/odpub/pdf/63403.pdf