By: Nicole Parmar
The housing bubble is still very real. Now more than ever, the “housing as a commodity” mindset is forcing mid and low-income citizens out of their homes and into cramped apartments in an attempt to lower their housing costs. If you live in cities such as Vancouver, Paris, New York or London, you know downsizing for affordability is still no easy feat.
Above Avg. Mid. and Low-Income Citizens Can’t Afford A Home
Based on the average cost of a two-bedroom apartment, the average renter would need to make $20.30 an hour. In the District of Columbia and six other states, they’d need to earn $25.00/hour.
If you live in Metro Vancouver, there is not a single market in which a median income is enough to afford a detached house, according to data compiled by a home search website.
These numbers are shocking! Especially when considering that the national minimum wage rate is only $7.25 in the USA and $12.65 in CAD. A person making only minimum wage would find it impossible to keep up with housing costs. That person would need to work 90 hours a week to afford such an apartment.
It’s numbers like these that paint the picture of our current housing marketing.
- Those Who Spend 50% or More: One report found that more than 11 million Americans are currently paying more than half of their income for their monthly rent.
- Those Who Spend 30% or More: An additional 10.3 million Americans are paying more than 30% of their income to cover their housing costs.
- 18% of Canadian renter households spend more than 50 percent of their income on housing.
- 22% of renter households in Metro Vancouver are using more than 50 percent of their income to cover their housing needs.
This comes at a time when construction companies are building larger homes than ever. On average, more than 2,600 square feet per home. This is one reason the supply of affordable housing continues to dwindle.
Even if homes are smaller – if they are in a desired area, such as downtown, the cost will be too great for most people to afford.
Global Investors Are Turning Homes Into High-End Assets
Market trends show that housing is becoming less of a right and more of a class asset.
- Fewer Small Homes: Less than 4% of the homes being built are under 1,400 square feet. This is compared to 9% market share back in 2005.
- More Extremely Large Homes: Meanwhile, homes over 4,000 square feet have become a much larger slice of the market, making up more than 9% of new homes last year (compared to just 6.6% in 2005).
- Mostly Large Homes: Homes measuring between 3,000 and 4,000 square feet accounted for 21.7% of new homes built in 2013, compared to just 15% in 2005.
These numbers show that construction and development firms are becoming more focused on building high-end assets than they are on building affordable housing solutions, which we are in desperate need of.
Solving The Housing Crisis with Government
With the most recent trends, we are quickly heading towards a housing market where only the top 5% will be able to afford to purchase a home. Everyone else will be renting from them.
The key to solving the housing crisis is to recognize how our nation has gotten to this point. The primary cause is that developers are going where the money is. In other words, rather than working on affordable housing projects, they
Instead of prioritizing economic interests, we need to focus on prioritizing human interests. We need to find ways to build more affordable housing developments that are within reach for low and moderate-income buyers. This means new legislation.
- Make Housing A Right: Legislation should also be used to recognize housing as a human right, which will burst the housing bubble once and for all.
- Set Limits & Minimums: Developers are following the money and building high-end, roomy homes to sell to native and foreign elite. Instead, new legislation should be put in place to encourage them to build affordable housing.
- Prioritize Affordable Housing: Local policy should be used to offer perks to developers like California does. New bills should give permitting priority to projects that include affordable housing development.
Housing is no longer a basic right. It’s an asset only the rich can afford. Real estate and human rights are intricately connected, and it’s time for a change.