Toward a Rental Society? The Costs of Smart Growth (Urban Consolidation/Compact Development): The 7th Annual Demographia International Housing Affordability Survey
Full report at: http://www.demographia.com/dhi.pdf
The just released 7th Annual Demographia International Housing Affordability Survey rates Hong Kong as the most unaffordable market out of 7 covered nations, with a Median Multiple of 11.4 (defined below). This year’s edition covers 325 metropolitan markets, up from 272 last year.
Summary of Introduction by Joel Kotkin
Renown author Joel Kotkin notes that "Over the past decade, even after the housing bubble implosion, the ratio of incomes to housing prices has shown a steady increase" in his introduction to the 7th edition. Kotkin cites markets such as Los Angeles, San Francisco, New York Boston and in Florida, and adds that: "perhaps most remarkable has been the shift in Australia, once the exemplar of modestly priced, high quality middle class housing, to now the most unaffordable housing market in the English speaking world."
He disputes "progressives" who "not only "claim the dense urbanism is the vast preference of the next generation – a claim he notes is not supported by objective research – but also embrace the notion of renting over owning. He calls this "a very dangerous concept, essentially promoting a form of neo-feudalism which reverses the great social achievement of dispersing property ownership."
Kotkin concludes that: "The ideal … Should not … be affordability alone but affordability coupled with economic growth" and that "broad based middle class prosperity depends in large part on housing affordability, and may do even more so in the future."
Summary of Results
Again, Australia was the most unaffordable nation (with complete data), which a Median Multiple of 6.1 (a "severely unaffordable" rating). This is double the historic affordability norm of 3.0 that continues to apply in the United States and applied broadly throughout Australia before adoption of land use policies that prohibit development of low-priced housing on the urban fringe and related land and housing rationing policies (these policies are referred to by a number of names, such as "compact development," "smart growth," "growth management," and more recently, "livability"). Sydney passed Vancouver to become the second most unaffordable metropolitan area with a Median Multiple of 9.6. Melbourne placed fourth most unaffordable internationally, at 9.0. All other major Australian markets were "severely unaffordable," including Brisbane (6.6), Perth (6.3) and Adelaide (7.1).
New Zealand and the United Kingdom were also severely unaffordable, with Median Multiples of 5.3 and 5.2 respectively, more than two-thirds above the historic affordability norm that had applied in these nations as well. Both nations, like Australia, have seen their housing prices inflate as land use policies have increasingly rationed urban area land for development, which naturally raises its price and the price of housing. The most unaffordable market in the United Kingdom was Plymouth & Devon, at a "severely unaffordable" 7.5. Other severely unaffordable markets included London (GLA) at 7.1 the London Exurbs (East and Southeast England) at 6.5, Liverpool & Merseyside at 5.5, Newcastle & Tyneside at 5.5, Stoke on Trent & Staffordshire at 5.1 and Blackpool and Lancashire at 5.1.
Ireland had a "moderately unaffordable" Median Multiple of 4.0, with house prices still well above pre-housing bubble levels, but well below the peak.
Canada achieved a "moderately unaffordable" Median Multiple of 3.4. Vancouver ranked as the third most unaffordable metropolitan area out of the 325 markets, with a severely unaffordable Median Multiple of 9.5. Montreal (5.2) and Toronto (5.1) were also severely unafforable.
The United States had an "affordable" Median Multiple of 3.0, despite the fact that housing prices still remain above pre-housing bubble levels in markets that have more restrictive land use regulations (such as Honolulu at, San Francisco at 7.2, San Jose at 6.7, San Diego at 6.2, and New York at 6.0. Prices also remain well above pre-bubble levels in seriously unaffordable Seattle at 6.2 and Portland at 6.2, metropolitan areas that essentially ban urban fringe development.
Dr. Donald Brash, former Governor of the Reserve Bank of New Zealand put the issue succinctly in his introduction to the 4th Annual Demographia International Affordability Survey in 2008:
The one factor which clearly separates all of the urban areas with high Median Multiples from all those with low Median Multiples is the severity of the artificial restraints on the availability of land for residential building.
The Median Multiple is the median house price divided by the median household income, perhaps the most widely used measure of housing affordability.