Homeowners face increasing financial strain in Lower Mainland

More households in the Lower Mainland are facing the financial strain of home ownership, a Metro Vancouver staff report states.

In 2006, the number of homeowners spending more than 30 percent of their income on housing increased to 142,820 compared to 109,285 in 2001, according to the report, which crunched the latest census data on income and shelter costs released by Statistics Canada on May 1 this year.

What this suggests is that a number of owners have stretched their financial means to get into the housing market, report author and Metro Vancouver senior planner Lorraine Copas said in a phone interview.

“It’s not bad that you have an asset,” Copas told the Georgia Straight. “But it’s not good in the sense that you now see a significant financial vulnerability among these households. An increase in interest rates by a percent or a change in their economic status would mean that they’re at greater risk of losing their housing. And if you’re spending more than 30 percent on housing, you don’t have much money left for other things.”

Copas explained that the 30-percent expenditure threshold for housing is a standard measure of reasonable affordability. Her report went before a May 16 meeting of Metro Vancouver’s housing committee.

Her report also stated that homeowners accounted for the “majority of growth in affordability challenges” among households in Metro Vancouver in the five years between the StatsCan census reports of 2001 and 2006. The number of renters paying at least 30 percent of their income for shelter decreased from 125,940 in 2001 to 123,050 in 2006. However, this doesn’t mean that renters are faring better than homeowners.

“While the number of owners spending 30% or more of their income on shelter has increased between 2001 and 2006, renters are more likely to experience affordability challenges with approximately 43.7% of all renter households across Metro Vancouver spending 30% or more of their income on shelter compared to 27% of all owners,” the report noted.

The report likewise pointed out that about 23 percent of renter households, or 63,285, are spending at least 50 percent of their earnings just to keep a roof over their heads. “These are households which face extreme affordability challenges and which are considered to be at increased risk of homelessness or economic eviction,” Copas wrote.

In the interview, Copas suggested that a “large percentage of new mortgages may be high-risk”. She explained that this means that buyers took out mortgages at a variable interest rate and with longer amortization periods, and made small down payments.

“Households will do what they can to get into the market,” Copas said. “When you qualify for a mortgage, the bank determines the level of financial risk. Going to variable rate, longer amortization, or lower down payment puts families in greater financial vulnerability.”

Her report noted that the average monthly housing cost for owners in the Lower Mainland increased to $1,081 in 2006 compared to $1,057 in 2001. Average rents decreased to $812 from $814 between the two census periods.

Some 9,752 households in the region are waiting for vacancies in subsidized housing units owned by B.C. Housing, according to the report.

The same report also provided a breakdown of households experiencing difficulties with respect to housing. Families account for about 56 percent of both renter and homeowner households that spend more than 30 percent of income on shelter. Of these estimated 148,570 families, 77 percent are families with children, and 20 percent are single-parent families. Sixty-eight percent of these families are homeowners.

Thirty-nine percent of all renter households that spend at least 30 percent of their earnings on housing are families. Of these, 31 percent are single-family households.

The other 61 percent of renter households facing affordability challenges includes single seniors on fixed income and singles.

“It confirms what many of us know,” Copas said in the interview about her report. “The region is unaffordable for both renters and owners trying to get into the market.”