Toronto Named 5th Most ‘Severely Unaffordable’ City in the World: Report
Due to the sky-high cost of living, Toronto has been (once again) recognized for having one of the most unaffordable housing markets in the world, according to a new report.
The Urban Reform Institute recently released its 2021 report on international housing affordability, in which Toronto ranked fifth on the list of the top “severely unaffordable” cities around the world — this is up one spot from last year’s ranking.
The report looks at middle-income housing affordability in 92 major metropolitan housing markets in eight areas, which include Australia, Canada, Hong Kong, Ireland, Japan, New Zealand, Singapore, the United Kingdom, and the United States during the third quarter of 2020.
Amid the global pandemic and subsequent lockdowns last year, it’s not surprising that housing affordability — given the large influx of new buyers, particularly in suburban and outlying areas — has continued to deteriorate.
As a result, the report notes that many low-income and middle-income households (who already have suffered the worst consequences from housing inflation) will see their standards of living further decline.
“The affordability issue is particularly critical due to the strong increase in remote working (telework) during the pandemic which is accelerating the movement to more affordable places. It will likely also help flatten or even reduce prices in the highest-cost housing markets as other households seek less costly housing elsewhere,” wrote Wendell Cox, Senior Fellow at the Urban Reform Institute and the author of the report.
“We hope that the losses sustained during the pandemic will be quickly reversed and the increasing inequality attributable to higher house prices will become a thing of the past,” said Cox.
According to the report, a markets’s affordability is ranked based on its median multiple (median house price divided by median household income).
To be considered ‘affordable’, a housing market needs a median multiple of 3.0 and under, to be ‘moderately unaffordable’ requires a median multiple of 3.1 to 4.0, ‘seriously unaffordable’ requires a median multiple of 4.1 to 5.0, while the most severely unaffordable major housing markets have a median multiple of 5.1 and higher.
This year, there are only four markets in the world that are considered “affordable” and they are all located in the US: Pittsburgh, Rochester, Buffalo, and St. Louis.
While only six Canadian markets were included in this year’s report, Canada is currently home to one “moderately affordable” housing market — Edmonton, which has a median multiple of 3.8. This is followed by Calgary (4.1), Ottawa-Gatineau (5.2), Montreal (5.6), Toronto (9.9), and Vancouver (13.0).
In 2021, the most severely unaffordable markets are in China, Canada, Australia, and New Zealand, with Hong Kong topping the list as the most expensive city to live in, having a median multiple of 20.7.
Vancouver claimed the second spot with a median multiple of 13.0, followed by Sydney (11.8), Auckland (10.0), and Toronto (9.9).
As the data shows, ‘unaffordability’, both here and abroad, is far from new — it’s a trend that’s been steadily increasing for years.
“The number of housing markets that have become severely unaffordable in the United States and Canada has grown steadily since 2004,” wrote Cox, adding that “housing affordability has deteriorated the equivalent of six years of annual household incomes in Toronto” from 2004 to 2020.
This comes as the lack of housing supply in Ontario is helping drive prices higher, which has resulted in the growth in home prices (and this should surprise no one) is outpacing household income growth.
And given that the average price for all home types in the Greater Toronto Area (GTA) is expected to surpass the $1 million mark in 2021, it’s safe to say that Toronto’s affordability is only going to worsen in the years to come.
You can read the full report here.