What is Affordable Housing?

Affordable housing is a subjective measure. Traditionally, affordable housing has meant any housing which does not consume more than 30% of a household’s monthly gross income. This indicator strictly addresses the economic side of affordable housing and is based on a long-standing metric which implies that a household will be able to pay off a mortgage or afford rent and have the means to live comfortably with the remaining income to purchase other discretionary and non-discretionary goods and services.

Affordable housing is also highly relative to the locale in which it is based. Income levels within a community have a heavy influence on the prices for housing. Saskatchewan, for example, has set a maximum income limit by which affordable housing programs are based. 

There is a limit for renters and a slightly higher limit for homeowners.  Exceeding this income limit means that the household does not qualify for housing which was built with public funding assistance to bring the cost down.

Public funding for affordable housing is usually in high demand when the marketplace is not meeting the needs of a significant number of people. Even working people with wages sometimes need assistance to move within the housing spectrum (i.e. renting to owning). 

There tends to be a severe lack of affordable housing during economic booms. Building affordable housing during a boom is often much more difficult and costly than building during a softer economy, requiring significantly more public funding.     

The double benefit of affordable homeownership

Affordable housing has traditionally been about renting. Governments have typically stepped in with funding to ensure that there is sufficient supply of below-market rental units available to people with low and moderate incomes. This usually occurs when the cost of construction increases to a level where it outpaces rises in incomes and therefore is unaffordable to tenants and unattractive to developers and homebuilders. 

However, affordable homeownership has a double benefit. If renters can be assisted to move into homeownership it creates a new homeowner who will be better off financially in the long run, and it frees up an existing rental unit contributing to the supply of rental units in a community. 

Creative approaches to financing, government programs and innovations in building techniques and designs can converge to create an environment for the development of new forms of affordable housing. For example, modular construction is an ideal method to increase the supply of affordable housing for three reasons:

1. It is cost effective – costs and environment are controlled.
2. It is extremely well constructed – often stronger and more energy efficient over traditional housing.
3. It can be built quickly – especially important during times of escalating costs and rapid growth.

Homelessness vs. Affordable Housing

Homelessness is not really about affordable housing. Homelessness is a social issue caused by the combination of many effects from family breakdown, substance abuse, addictions, and lack of support. In other words, homelessness won’t be solved simply by increasing the supply of affordable housing units. 

However, any Housing First strategy requires there to be an adequate stock of good quality affordable housing units to begin addressing the social issues causing homelessness.