Housing affordability

Patrick Condon is a Professor at the University of British Columbia. With UBC law student Thomas Kroeker, he authored The 50 Year Vancouver Experience on Housing Affordability with Adding Housing Density.

The paper is republished here with Prof. Condon’s permission.

Across North America, there is a significant movement to increase housing density in already developed neighborhoods. The underlying belief is that by increasing the housing supply, home prices will decrease and ordinary citizens will then be able to afford them. This of course aligns with the economic principle of supply and demand.

Vancouver, more than any other North American city, has, for over a half a century, actively tested this hypothesis. Since the 1960s, Vancouver has added more housing units, relative to its total housing units at that time, than any other centre city in North America. Despite this, Vancouver’s housing market is now North Americas most expensive (relative to median area household wages).

Please note that in this work we focus on already built out centre cities like Vancouver. “Centre City” refers to the main municipality at the heart of a metropolitan region (methodologies described in illustration 2).

The illustration just below shows Vancouver’s achievement relative to other North American centre cities – infilling housing units such that it nearly tripled net housing units, growing by 167 percent, against its much lower 72 percent increase in population.

This chart shows the percentage change in housing units for selected North American centre cities. These cities were largely “built out” by 1960 and did not grow through annexation or amalgamation. As a result, housing unit increases reflect primarily infill development within existing neighborhoods. Vancouver stands out, having tripled its number of housing units through infill alone since 1960.

The data might be better represented by showing how the ratio of housing prices to median household income has changed over time, as shown in illustration 2 below. It shows the extent to which Vancouver’s housing market has diverged from the norm in both residential density, housing unaffordability, and housing supply – all since 1960.

The methodology and sources for this chart are detailed above. In brief, no other centre city has added a greater percentage of new housing units since 1960 than Vancouver. Yet, this data also reveals—perhaps for the first time—that adding housing to existing urban neighborhoods has not delivered the affordability many hope for. Despite leading all other cities in housing unit growth, Vancouver now faces the highest housing prices in North America, as measured by the gap between median household income and the median rent or price of a new home.

This raises important questions about the impact of increased housing density on home prices and, more crucially, on urban land prices.

Importantly, the substantial increase in housing units within Vancouver’s fixed geographical boundaries—thus essentially all through infill development—has not resulted in lower housing prices when compared to other major Canadian and U.S. central cities. Instead, this effort has coincided with a significant rise in the market price for developable land.

Reflecting on this data, it becomes clear that increasing housing supply does not automatically lead to lower home prices – prices that are within reach of average wage earners. Instead, the situation in Vancouver suggests a need for a more nuanced approach to understanding the relationship between housing density, land prices, and overall affordability. Ultimately, this data suggests that a strategy of nearly tripling average residential density, as Vancouver has done, does not seem to generate housing prices that are such that wage earners can afford, and that the underlying factors driving urban land price inflation are in much need of attention.

Demographics link: see attached document.