The 11th Annual Demographia International Housing Affordability Survey: 2015 has been released. The survey provides ratings for metropolitan markets in Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the U.K. and the U.S. There are some interesting global trends:
Historically, the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices from 2.0 to 3.0 times median household incomes. However, in recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others. Without exception, these markets have severe land use restrictions (typically “urban containment” policies) that have been associated with higher land prices and in consequence higher house prices (as basic economics would indicate, other things being equal).
Virtually no government administering urban containment policy effectively monitors housing affordability. However, encouraging developments have been implemented at higher levels of government in New Zealand and Florida, and there are signs of potential reform elsewhere. (1-2)
These findings are consistent with Glaeser and Gyourko’s research on U.S. housing markets. Not too many local politicians seem to acknowledge the tension between land use policies that limit residential density on the one hand and housing affordability on the other. The de Blasio Administration in NYC is a refreshing exception to that general rule.
The explicit bias of the Demographia International Housing Affordability Survey “is that domestic public policy should, first and foremost be focused on improving the standard of living and reducing poverty.” (2) Those who favor policies that create more affordable housing should take to heart the call for greater density and less restrictive zoning for residential uses. Otherwise, we are left with subsidy programs that can only help a small percentage of those in need of affordable housing and a lot of empty promises about affordable housing for all. Subsidies have a place in an affordable housing agenda, but so does density.