What does “affordable” housing mean and who is “low income”?

Prepared by Jean Swanson, CCAP, Jan, 2009 – Contact 604-839-0379

When talking about what kind of housing we need in the Downtown Eastside, many people say we need housing that is affordable to low income people, or to the working poor.  But we don’t have an agreed upon definition of who these people are or what they can afford for housing.

If we want to encourage housing for low income people and the working poor in the DTES, we need to know realistically if the market will really be able to build this housing or if we need government help.

To figure this out, we need to answer some questions.  Here is my attempt:

How does the government define low income? The federal government uses the Low Income Cutoff Line to define “low income.”  The 2006 LICOs for a city are

1 person            $21,199
2 persons          $26,392
3 persons          $32,446
4 persons          $39,393

What percentage of income should people pay for housing? BC Housing uses 30%, which is generally accepted as the highest percentage of income that should be paid on shelter costs.

How much income do people on welfare, disability, seniors pensions and minimum wage, a low income line wage, and various other wages get, and how much rent can they afford per month?

Welfare for a single person:  $610 in total; $375 designated for shelter
Disability for a single person:  $906 in total; $375 for shelter
Minimum government pension for seniors:  about $1000 in total; $333 for shelter
Minimum wage ($8 an hour, full time, full year):  $1387 in total; $416 for shelter
Wage required to meet LICO maximum for single person ($10.19 an hour):  $1767 in total; $530 for shelter
$15 an hour wage:  $2600 in total; $780 for shelter
$20 an hour wage:  $3467 in total; $1040 for shelter

How much rent is required to pay for a 400 square foot market unit (for a single person) in the DTES? According to pro forma work by the Building Community Society, about $1200 a month.

What wage would be required to afford $1200 a month for a singles unit? $23.08 per hour.  Couples and families would require larger units.

What is the lowest wage you could have and afford to buy a condo in the DTES? DTES condos have been advertised at $300,000 to $500,000 for a one bedroom.  Assuming the buyer had a $50,000 down payment (unlikely for low income people), a 30 year mortgage and paid a 6% interest rate, mortgage payments would be $1499 a month for the $300,000 one bedroom condo.  Monthly condo fees would be extra, say $300 a month.  To afford $1800 a month on shelter at 30% of income, a person would have to earn $60,000 a year or two people would have to be satisfied with a one bedroom unit and earn $30,000 each.  This would break down to $28.85 an hour for one earner or $14.42 an hour each for 2 people.