A Severe Problem

“Affordability” generally means that households can spend less than 45% of their total budget on housing and transportation combined, in order to leave them with enough money to spend on other essential goods such as food and healthcare. It can also allow workers to spend more time with their family, accept a more desirable but lower-paying job, or invest in education or a small business. Increasing affordability gives low-income people more freedom and opportunity. 

Most lower-income households spend more on housing and transportation than is considered affordable, as illustrated in the following graph. These costs are regressive, their share of household spending declines with income.

Portion of Household Spending By Income Quintile

Household spending chart

Most households, particularly those with lower incomes, spend more than is considered affordable (45% of total budgets) on housing and transportation.


Of course, actual spending varies. Since approximately a third of lower-income households own their homes and a quarter are car-free (they own no vehicles), these average statistics understate the cost burdens on those that pay rents or mortgages, and own automobiles. The figure below shows spending by lower-income (average of First and Second income quintile) households, assuming that home-owning households spend 70% less on housing, and car-fee households spend 70% less on transportation, than overall averages, and with adjustments to other spending categories based on their budget shares.

For example, it assumes that home-owing households in these income classes spend only $3,408 annually on housing compared with the $11,361 overall average, and car-free households spend $1,422 on transport compared with the $4,741 overall average, leaving more money to spend on other goods, while rent/mortgage paying households spend $12,435 on housing, and car-owning households spend $5,104 on transport. This indicates that lower-income households that pay rents or mortgages, AND own a motor vehicle, devote 59% of their budgets to housing and transport; 31% more than considered affordable!

Lower-Income Household Spending By Home and Car Ownership

Low-income Household spending chart


This figure adjusts expenditures by the two lowest income quintiles to account for house and vehicle ownership, and therefore their housing and transportation cost burdens. It assumes that home-owning households spend 70% less on housing, and car-free households spend 70% less on transport than overall averages, with the savings redistributed to other spending categories based on their budget share. This indicates that lower-income households that rent or mortgage paying, car-owning households devote approximately 60% of their total household budgets to housing and transport, far more than the 45% considered affordable, leaving little money to spend on other essential goods.

What Types of Housing are Most Affordable?

The most affordable housing usually consists of 400-1,200 square foot (40-120 square meter), low-rise (two to six storey) wood-frame townhouses and apartments, with unbundled parking (residents only pay for the parking spaces they want), build in walkable urban neighbourhoods where residents don’t need a car to access most services and activities. This is sometimes called Missing Middle housing.

Missing Middle Housing Types
Missing Middle is a range of multi-unit or clustered housing types compatible in scale with single-detached homes that help meet the growing demand for walkable urban living.


This type of housing generally has the lowest total costs, including land, construction, operation and transportation costs, and is suitable for infill in residential neighbourhoods. Areas with very high land prices, such as downtowns, can justify the higher cost of concrete construction which allows taller buildings and therefore reduces land requirements per unit.

Of course, households are diverse and therefore need diverse housing types. Not everybody is suited to downtown living; some households need larger units for larger or extended families. Artists’ lofts must accommodate noisy and dirty activities. Others need homes which are suitable for wheelchair users, or that can accommodate pets. Affordable housing policies should strive to accommodate all of these needs in the most cost-effective and responsive way.