What’s affordable?

Ontario’s 2020 Provincial Policy Statement (PPS) defines affordable housing according to whether it’s ownership or rental, but the percantages of income are the same for both. For ownership (p.39 in the PPS), it’s defined as the “least expensive” of (emphasis added):

  • housing for which the purchase price results in annual accommodation costs which do not exceed 30 percent of gross annual household income for low and moderate income households; or
  • housing for which the purchase price is at least 10 percent below the average purchase price of a resale unit in the regional market area;

For rentals, it is the least expensive for (emphasis added):

  • a unit for which the rent does not exceed 30 percent of gross annual household income for low and moderate-income households; or
  • a unit for which the rent is at or below the average market rent of a unit in the regional market area.

This requires another set of definitions for what the PPS means by “low and moderate income households” for these two categories (emphasis added). For ownership;

  • households with incomes in the lowest 60 percent of the income distribution for the regional market area;

And for rentals:

  • households with incomes in the lowest 60 percent of the income distribution for renter households for the regional market area.

But what does that mean for Collingwood? Well, the 2021 Census provides some useful information.

The median, after-tax income for Collingwood is $72,500 (up 17.7% from $61,600 in the 2015 Census). But 13.3% of our households had incomes under $30,000; 26.5 between $30,000 and $59,999; and 29.6% between $60,000 and $99,999. Roughly 40% of households here earn under $60,000 a year, and 70% earn under $100,000. So the 60% mark is going to be close to the median of $72.5K. Keep in mind that this is the AFTER-TAX income. The before-tax income would, of course, have to be higher by at least 25% (a $50,000 salary – or $25.64/hour – will bring home about $36,662 a year after taxes, or $3,055 per month, according to this site’s calculations).

According to MLS listings, the average house price in Collingwood has fallen approx. 14% to $865,000. But that’s a vague statistic. For a two-bedroom detached house, the average is $943,000; for a two-bedroom townhouse it’s $578,000, and for a two-bedroom condo, it’s $655,000. Prices rise for three bedrooms, and are higher ($1.1M, $708K, but no 3-bedroom townhouses have been listed in 6 months: the last time they sold for $845K). The average price for a detached home here is $1.1M.

Quick calculation: 10% below the average house price is $778K, but for a detached home, it’s $999K (see the second PPS definiton, above).

In Collingwood, 130 more people in 2020 than in 2019 had no employment income, while 375 more people had employment income between $1 and $19,999 and 520 fewer people had employment income between $20,000 and $59,999 in 2020 than in 2019.

The charts at the bottom of that census page also show the distribution of household incomes, as well as individual earning rates. Suffice to day, a lot of households in Collingwood earn less than the median.

But what does it cost to buy a house here these days? Using a mortgage rate calculator, and a 5% downpayment, the average house price (including mortgage insurance costs, and $9,775 provincial land transfer tax for first-home buyers), 25-year amortization, a 4.24% interest rate, would require a downpayment of $61,500 plus $4,505 a month for payments. plus property taxes (approx. $721/mon), utilities (approx. $400/mon) for a total of roughly $5,700 a month. And that doesn’t include food, gas, car payments, entertainment, child or school costs, etc.

Housing, property tax, and utility costs would run about $70,000 a year for the “average” home here. Or basically eat up all the median household income. So if $70K is 60% of the household income, a family needs to make at least $233K to afford the average house here.

For the median income family ($72.5K), affordable accommodation costs cannot be more than $21,750 a year, or about $1,815/mon. Working backwards (a 5% downpayment, 4.24% mortgage, etc.) I figure they could afford a home selling for about $235K, or about a quarter of the average house price in Collingwood. Let me know if you can find a home at that price…

Affordable rentals are the same: 30% of the income, or about $1,800 a month for a family earning the median income. Searching sites like rentals.ca, I can find no houses for that low in Collingwood (but a very few in Wasaga Beach). There are a few apartments listed on rentboard.ca and this site for that low, but most are higher. That’s still out of reach for the 40% of households earning under $60,000 a year. And that includes a lot of seniors living on fixed incomes.

So when council addresses affordable housing, it faces some very challenging facts. First, home ownership is not easily affordable for many households because house prices are so high. Rental prices are also driven by demands, and rising costs for maintenance and property taxes.

Councils cannot change market prices or rental rates, although they can do some things to reduce costs for new development to encourage more rental units to be built (reducing, deferring, or eliminating local development charges for example). The province provides very few tools for small municipalities, however, and the responsibility for socially-assisted housing lies with Simcoe County. It’s a challenging situation.

What can we do? Make affordable housing council’s first priority next term, and actively look for opportunities, and to advocate with both the province and the county for assitance and support.

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