Housing Affordability: Transit Influences in the Corridor and the Waterloo Region
Summary
The intention of this report is to articulate the current housing affordability environment and how it is affected by the incoming Light Rail Transit (LRT) system or ION. The route of the LRT is further defined by an Analytical boundary to measure the properties that will be most affected and is most viable to be transformed by transit. This defines the Central Transit Corridor (CTC) which is separated into two stages. Stage one runs from Conestoga Mall in Waterloo to Fairview Mall in Kitchener while running through uptown Waterloo and downtown Kitchener and will be completed by year-end 2018. Stage two runs from Fairview Mall Kitchener to Ainslie Street Station in downtown Cambridge running through Preston (A former town now a part of Cambridge) and southward through Hespeler Road. The Region of Waterloo began the CTC Monitoring Project with the University of Waterloo’s School of Planning in 2011 with direct assistance from Dr. Dawn Parker and Dr. Jennifer Dean. Since then, the region has collected data for analysis and released results yearly to the council and the public to provide insight into the dynamic changes taking place in the ION corridor. Most results have displayed reasonably stable variables with minimal concerns. In 2017 however, the homeownership indicator results have given a stark outlook on the corridor and regional affordability outlook. To provide a thorough understanding of this indicator and result, this report will touch on the methodology, and results and will provide a discussion to thoroughly understand the economic and planning trends that may contribute to the gentrification and speculation along transit corridors.
Introduction
A growing population within the Waterloo region under any economic state requires an array of housing options. Most importantly, driving emphasis toward mixed-income developments which consist of smaller homes or units aimed at first-time buyers, young families, or lower-income inhabitants. Larger homes/family-sized units for growing families and households to accommodate down-sizing and multi-unit housing opportunities for students and changing lifestyles. Different demographics of the population, such as vulnerable populations, seniors, persons with disabilities, and new Canadians face evermore contests in locating and fortifying appropriate affordable housing. In 2018, housing affordability for both home ownership and rental properties has been reaching imperfect levels, causing a greater need for support and measures taken by all levels of government, especially lower-tier governments which are at the helm of providing and gauging the needs of populations.
The CTC (Central Transit Corridor) Monitoring Project measures this need and the market environment the region holds for each year. Beginning as a baseline in 2011, the project ever since has been monitoring not only housing affordability but a total of 16 indicators that can be measured depending on the availability of data. Some of these indicators are; Transit Ridership, Active Transportation, Walkability, Land Use Mix, Heritage Resources, Building Activity, and Perception of Safety just to name a few. Analyzing the Housing Ownership Indicator for 2017 data, the change in approach within the methodology modifies what is determined to be used for the denominator in calculations. This switch, for the first time in the CTC Monitoring Project, takes the Income Approach rather than the Market Approach. Most importantly, this shift indicates the significance of the housing affordability concern within the CTC and Region of Waterloo. This report will observe housing affordability from a land-use perspective at a regional level.
Purpose
As the housing market maintains steady growth by means of intensification within the region’s existing built environment, local governments may be able to swiftly warrant more aggressive methods to ensure affordable housing such as inclusionary zoning, tax abatements, and purpose-built rental development. Tools such as these must be adopted as early as possible to ensure that the region is well-resourced to preserve affordable housing where investment is occurring. It is important that affordable housing be served by rapid transit to provide reliable access to jobs, services, and amenities. In an overarching term, rapid transit provides “citizen opportunity” that can and should benefit all demographics.
Often, the announcement of a new rapid transit line, especially if it is the first rapid transit line in a municipal jurisdiction, causes rents and property taxes to increase due to a speculative rise in land value. Such an increase in housing costs may prevent low and moderate households from staying in their homes. Also, it may make the construction of new affordable housing less likely. In the Region of Waterloo, as in all Ontario municipal jurisdictions, affordable housing is a responsibility shared by multiple levels of government, though municipalities are the front-line service providers. As later sections of this report will explain the various methods to ensure market control and purpose-built affordable housing solutions, much of the municipality’s capacity to ensure an adequate affordable housing supply is related to the amount of provincial and federal funding available.
There are many ways to approach the affordability problem that rapid transit can create. This report will focus on land-use planning and policy tools for the purpose of guiding the integration of affordable housing policies inside and outside of the Central Transit Corridor. However, as this report will gather updated findings from worldwide precedents that may prove useful and can be used to maintain and increase the supply of affordable housing near rapid transit, the report will also touch on subjects that directly affect and influence the issues arising but is not in anyway in direct control of the planning and municipal governments ability to solve.
Methodology: Housing Ownership Affordability Indicator
Under the Monitoring of the CTC, the Home Ownership indicator has long been a variable of steadiness since the recording began in 2011. A housing transaction is measured as affordable by the purchase price resulting in annual accommodation costs which do not surpass 30 percent of gross annual household income for low-and moderate-income households. The indicator during its inception was to be based on the Province of Ontario’s Provincial Policy Statement (PPS), the Region’s Housing Action Plan defines an affordable housing target as the lower of the two approaches.
a) Income Approach: housing for which the purchase price results in annual accommodation costs which do not exceed 30 percent of gross annual household income for low- and moderate-income households; or
b) Market Approach: housing for which the purchase price is at least 10 percent below the average purchase price of a resale unit in the regional market area;
Income approach: the 6th decile of household income as provided by Statistics Canada is used to represent low and moderate-income households. Using the methodology outlined in the ‘Affordable Housing Target’ report, the maximum affordable house price does not exceed 30 percent of gross annual household income for low and moderate-income.
Results
Each Year under the CTC Monitoring Project, the average residential unit transaction is calculated under the Affordable Ownership Affordability indicator. Between 2011 and 2016, the affordable cut-off average was determined by using the 10 percent below average sale price from the Kitchener-Waterloo Only and Cambridge Only average. This methodology was using the market average over the project's span.
The Income Approach is identified by using the 6th decile of household income as provided by Statistics Canada. It is used to represent low and moderate-income households. The 2017 CTC monitoring report was the first report to experience a shift from the Market approach to Income Approach.
In 2017, there were 812 residential transactions over $10,000 within the CTC, where 500 or 62 percent of the transactions met the affordability cut-off. Of the 500 affordable transactions, 286 (57) percent occurred within stage one and amounted to 36 percent of all transactions within the CTC. Of the 500 affordable transactions, 214 or 43 percent of the transactions occurred within stage two and amounted to 27 percent of all transactions within the CTC.
Within stage one, there were a total of 474 transactions over $10,000, of which 286 were between $10,000 and the affordability cut-off, which accounts for 60 percent of the affordable transactions in that portion of the CTC. Within stage two, there were a total of 327 transactions over $10,000, of which 214 were between $10,000 and the affordability cut-off, which accounts for 65 percent of the affordable transactions in that section of the CTC.
From 2011 to 2014, there were a total of 2,003 affordable transactions and 1,362 transactions which exceed the affordability cut-off. The number of affordable transactions has remained stable between 2011 and 2014 but transactions that are over the affordability threshold have increased between 2011 and 2013 and decreased between 2013 and 2014.
The following is a table displaying the results for Housing Ownership Affordability from 2011 to 2017. The 2017 calculations were determined using the Income Approach Average as the denominator. This year, the Income Approach average was used due to that it was the lower of the two approaches.
Interestingly, Affordable transactions outside the CTC significantly drop from a constant variable of 34% in 2016 to 17% in 2017. Typically, outside the CTC represents primarily single detached dwellings as the predominant residential housing type. This may also indicate where affordability is drastically affected due to this housing type typically being higher in value compared to all other housing types and causing pressure for home buyers to seek alternative housing alternatives that would lead to housing types found in the CTC.
Discussion
In response to the results, multiple of factors in planning literature and policy can be analyzed to better understand the impact planning decisions have on housing values. The following discussion and theories will be examined in LRT as a catalyst for Gentrification, the impact of LRT on low-income households, and Family dwellings missing from intensification.
The Impact of LRT on Low-Income Households and Neighbourhoods
As previously mentioned, even when a municipality impends on the decision to implement a rapid transit system can cause great interest within the proposed vicinity, inflating demand and land desirability. However, the vicinity chose for such transit systems usually is based on locations a city could benefit the most for ridership and urban revitalization. This is where two sides clash. Circumstances for where low-income households are commonly located nearest to municipal cores and corridors where civic services and existing efficient transit exists. These areas are also most commonly underdeveloped for multimodal transportation, land use, and land value, thus creating many prospects to implement affordable housing that is not depressingly affected by the market. Utilizing the advantages of civic cores where many services, retail, groceries, and high transit occurrence for access to employment allow those who depend on such built environments.
Family-Sized Dwellings Missing from Intensification
In recent decades, household sizes have shrunk, and more people are living alone. At the same time, individuals are living longer, and the numbers of multi-generational households are becoming more prevalent. Today’s offered housing choices frequently fail to address the needs of individuals evolving housing selections. Regulations that fail to keep pace with such deviations intensify this misalignment.
As developers clamor for infill land along the LRT corridor, the construction of generic glass pylon slabs as the representation for local urban renewal becomes the norm. The presumed demand for young professionals and students in this growing knowledge-based economy can only go so far to satisfy the one and two-bedroom condominiums made available. Life changes and that includes the number of people in any given family. The question becomes, are homebuyers becoming forced into units that are not reflective of their stage in life, therefore, causing a demand surge in what family-sized units are left or being built? As these theories are simply my own, it is only anecdotal and assumed, but some merit in this may be seen. With the pressures on local governments to curb suburban sprawl, the reduction in the quantity of family-sized homes becomes a side effect. Rental apartments and market condominiums have only ever been able to sustain one or two-bedroom options in high quantities in North America. Is conventional thinking of what high-density residential development is not in line with our desire for compact sustainable communities to become? However, this does not simply mean correlation proves causation. There are multiple variables at play within the housing market today. Pinpointing to a finding will not alone identify the problem. It is one side of many, and this may be only a small contributing factor.
Understandably, however, in such a speculative market, housing no longer becomes a place to live but rather solely as an investment that eliminates the basic human need for shelter.
Conclusion:
Will affordable housing in the CTC remain affordable in the long term?
Just as neighborhood amenities are evident to have a positive relationship to housing prices, higher-order transit is concluded to the same effect if not more transformative. Often, from a proclamation of a new rapid transit line in a city, it causes property taxes and rents to surge due to a speculative rise in land value. Causing unintended consequences of domestic residents becoming displaced, and difficult for moderate to low-income residents to live near transit, a local government must react as quickly as developers to designate and assign land stock for rent and affordable housing developments (Thorne-Lyman et al., 2008). It remains to be seen what the regional government will act on once the 2017 report is released in early 2019.
Recommendations
- Waterloo Region to consider coordinating efforts between affordable housing strategies and transit corridor planning with the lens of providing opportunities to businesses and residents along proposed routes.
- Be leaders in bringing community stakeholders (government, business, social services, emergency services, etc) together to arrive at affordability solutions that enhance the community.
- Continue to provide mixed-use options to avoid creating income-segregated neighborhoods.
- Evaluate the possibilities of acquiring viable underused structures (churches, schools) within core areas with the mindset of construction conversion to create living spaces that suit transit values IE: on bus/lrt routes, better walkability, etc.
References
- Christensen, P. 2016. Investigating Solutions to the Affordable Housing Supply Challenges in Sydney: Two Alternative Typologies. Retrieved from: http://www.prres.net/papers/Christensen_AffordableHousingSupply.pdf
- Province of Ontario Ministry of Municipal Affairs and Housing. (2014). Housing. Retrieved from the Government of Ontario Website: http://www.mah.gov.on.ca/Page10679.aspx#Housing
- Thorne-Lyman, A., Nemirow, A., Wood, J., & Hickey, R. (2008). Realizing the potential: one year later. Berkeley, California: Center for Transit-Oriented Development. Retrieved from: http://www.reconnectingamerica.org/resource-center/books-and-reports/2009/realizing-the-potential-one-year-later/
