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					Profile of the Working Poor: A Housing Perspective Toronto Focus Group Summary

SXX Work Report

Submitted to: Professor Jane Londerville Submitted by: XXXXXXX Friday September 22, 20XX

Address
October 6, 20xx

Professor Jane Londerville Co-Op Faculty Advisor, R.E.H. Marketing and Consumer Studies Department University of Guelph Guelph, Ontario N1G 2W1 Dear Professor Londerville: I have spent my summer work term at the Housing Research Centre in Toronto, Ontario from th May 8 , 2006 to August 25th, 2006. While working for the HRC I performed a variety of tasks. My job responsibilities ranged from xxxx to yyyy. To help complete my tasks I have learned to use many tools such as “I-share” an intranet database for the whole company, “PropWorks” another database which holds information regarding tenants amongst other things, and “Wings” a geographical information systems program. I also fine-tuned my skills on Microsoft Office, Excel, and Outlook. Mr Manager and my supervisor,cccc, helped me formulate this project and reviewed this report. During my coop term I was involved in focus groups with poor residents of Toronto and other Canadian cities and this report summarizes those focus groups and relates the findings back to classroom material. I was able to make the necessary calculations through my Statistics classes, while my Introduction to Computer Applications class has enabled me to make the necessary charts and graphs I would like to thank the housing department for their help and guidance during my work term. It allowed me to learn the inner workings of an office as well as teach me what it takes to succeed in the world of business. You may contact me at student@uoguelph.ca or by phone at (416) xxx-xxxx to discuss the following report further.

Best Regards,

XXXXXX

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Table of Contents
Executive Summary ............................................................................................................ 4 Introduction and Overview ................................................................................................. 5 Toronto Focus Group Session............................................................................................. 8 Changes and Challenges in the Housing Market ............................................................ 8 Strategies and Coping Skills ......................................................................................... 11 Impacts on Housing Costs ............................................................................................ 12 Conclusions ....................................................................................................................... 14 Appendix 1 - Questions for Focus Group Participants ..................................................... 15 List of References ............................................................................................................. 17

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Executive Summary
The “working poor” can be defined simply as all the people living in households of modest income with at least one full-time working member. Canada Mortgage and
Housing Corporation (CMHC) had announced a study titled, Profile of the Working Poor: A Housing Perspective, and HRC Inc was chosen to carry out the study. With booming housing markets and strong economies, homeownership has been steadily increasing over the years. Unfortunately there are hardships along with homeownership, even rental. The overall purpose

of this study is to identify any key housing issues, linkages or solutions for the “working poor” segment. The theory for this study is that housing affordability problems are starting to creep up the income ladder and begin to affect the middle class such as, teachers, police officers and nurses, not just households under the poverty line.
After completing a literature review, HRC Inc in association with Higher learning University and the University of West have worked together to complete focus group sessions in Toronto, Ottawa, Calgary and Halifax. The focus groups gave a better sense of any housing affordability issues the people in the “working poor” sector might have.

Overall, the focus groups re-emphasized the facts stated from Statistics Canada and Social Development Canada. It concluded that there were many factors affecting affordability. Aside from wages, the other factors that cause housing affordability problems are personal, family or work-related. Even with Toronto‟s strong housing market and steady interest rates, housing affordability is affecting all blue collar workers and middle class incomes. The focus group sessions helped emphasize our facts and outlined assumptions.

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Introduction and Overview
A lack of affordable housing is evident in many communities across Canada. For most households, housing is the single largest monthly expenditure; therefore finding affordable, adequate and suitable housing remains a major concern for many individuals and families. According to the Canadian Council on Social Development, the number of individuals experiencing affordability problems has been increasing since 1990. Meanwhile, the number of affordable housing units available has decreased during this same time period. The overall purpose of this study is to identify any key housing issues, linkages or solutions for the “working poor” segment. Defining the “working poor” is a complex issue and has been researched for years. One way Social Development Canada defines the working poor as “individuals who work the equivalent of full-time for at least half the year, but whose family income is below a low-income threshold.” (Weldon, 2004). The Canadian definition tends to exclude full time students but they should be classified under the “working poor”; they are untrained and only work either part time or seasonal. For the purposes of this study, the “working poor” are all people living in households of modest income with at least one full-time working member. The theory for this study is that housing affordability problems are starting to creep up the income ladder and begin to affect the middle class such as, teachers, police officers and nurses, not just households under the poverty line/low income cut off (LICO). According to Bank of Canada, inflation in July 2006 came in slightly higher than expected, mainly due to the rising price in the housing and services sector (CBC News, 2006). “The bank said it judged that the current overnight rate is enough to get

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inflation back to its target. The risks to that forecast, the bank added, include upward inflation pressure that could be added by Canadian household spending and housing prices.” (CBC News, 2006). Inflation has also outpaced income. Across Canada, after January 2001, lower-income households experienced higher price increases (Chiru, 2005). Aside from wages, there are many factors that cause housing affordability problems. Examples of these factors are personal, family or work-related (Fleury & Fortin, 2005). Family plays the greatest role in determining the probability of a worker experiencing a period of low income. Workers who are the sole earners in the family are much more likely to have a low family income than other workers. Low-income workers are a mixed group. The large proportion of households in poor housing situations is still single-parent households, aboriginal families and recent immigrants. According to the Canadian Council on Social Development (CCSD) from 1991 to 2001, there has been an increase of 49% in males leading the single-family household and females by 35% (CCSD, 2006). Another indirect cost to housing affordability is the cost of child care. In 2003/04, there were only enough regulated child care spaces to accommodate 15.5% of Canadian children aged 0 to 12 (CCSD, 2006). This puts pressure on costs, especially if they can‟t find appropriate accommodation for their children it can result in days off work and a loss of income. A suggestion to relieve these housing affordability problems is to increase government involvement through transfer payments or social housing stock Renters tend to have more affordability problems than homeowners. Persons with lower paying jobs already struggle to find affordable rental units and will therefore be more likely to be excluded from homeownership, especially in fast growing metropolitan

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areas (Bell, 2006). With current interest rates declining, it is interesting to see homeownership increasing. According to Table 1, there has been a 15% increase in homeowners from 1991-2001.

Table 1: Trends in Tenure for the City of Toronto, 1991 and 2001 1991 2001 % Change # % # % 1991-2001 Renters 444,735 51.7% 459,750 49.0% 3.4% Owners 415,450 48.3% 477,915 51.0% 15.0% Source: Statistics Canada, 1991 and 2001 Census

Another reason for the increase in homeownership could be due to high rental rates. Table 2 shows the percentage change in average market rents from 39.8% for a 3+ bedroom apartment to 50.2% for a bachelor unit.
Table 2: Average Market Rent by Unit Type for the Toronto CMA, 1991, 2001 and 2005 % Change 1991 2001 2005 1991-2005 Bachelor $482 $698 $724 50.2% 1 Bedroom $592 $870 $888 50.0% 2 Bedroom $730 $1,039 $1,052 44.1% 3+ Bedroom $889 $1,248 $1,243 39.8% CMHC Rental Market Report, 1991, 2001, 2005

The new trend in Canadian households is the increasing amount of dual-incomes with more and more women entering the workforce. In 2003, almost 72% of Canadian mothers with children under age 16 were in the labour force working either full- or parttime. In 1993, 55.1% of women with children under three were employed and then in 2003 this percentage had increased to 63.4% (CCSD, 2006). The “working poor” is evident across Canada, but with respect to this report we will be focusing on the “working poor” in Toronto. The housing market in Toronto has been very strong lately with near-record levels of housing starts, strong economy and

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heavy net in-migration. Toronto has also seen rapid increases in the price of both new and resale ownership units. Housing Research Centre (HRC Inc) was recently acquired by Canada Mortgage and Housing Corporation (CMHC) to research and study the “working poor”; Profile of the Working Poor: A Housing Perspective. For the next phase in the study, we worked in association with professors from an eastern and western university to complete focus group sessions in Toronto, Ottawa, Calgary and Halifax. Many of these housing affordability factors, consequences and other strategies were discussed in the focus group sessions and are outlined in more detail below.

Toronto Focus Group Session
The Toronto focus group session was held on Monday June 12, 2006 from 5:30pm to 7:30 pm, at the CMHC Ontario Business Centre in Toronto. There was a great turnout, as 12 participants attended the session. Each participant entered the session with a different perspective and experience on housing. They all had a different background, age, career and living situation. Overall the session provided great feedback and insight on the “working poor‟s” perspective on housing affordability. The following is a summary of the answers given during the session. Refer to Appendix 1 for the list of questions asked during the focus group. Changes and Challenges in the Housing Market The predominant theme throughout the session was that housing (especially homeownership) has become less affordable. Many of the houses located in the city centre cost well over $500,000, which is way out of reach for many of the participants. It was interesting to note that although the general rule of thumb of housing affordability is

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to not spend more than 30% of your income on housing, but many of the participants admitted that they easily spend more than 30% of their income on housing. (On a side note, Table 3 helps to re-emphasize the increasing amount of households spending more than 30% of pre-tax income on housing costs. Ownership costs tended to outpace income growth during this period)

Table 3: Owner Households Spending 30% or More of Income on Housing in the City of Toronto, 1991 and 2001 1991 2001 % Change # % # % 1991 to 2001 49,275 11.9 106,220 22.2 115.6% Source: Statistics Canada, 1991 and 2001 Census

Much of this extra funding is needed to offset the increasing utility costs. One participant had suggested budgeting an extra 3-5% of your income towards utilities. Homeowners find that there are many hidden costs to owning and maintaining a home, not just the costs from financial institutions. An example is the high transportation costs associated with driving to and from work, especially with the increasing price of gas or the purchase of a second car. Also tend to be more motivated to purchasing new items for the house as opposed to a rental unit. Although there was a mutual consensus that housing has become less affordable, one finds that it is much easier get into homeownership as much as before. Nowadays, there are more incentives given from the developers, financial institutions are willing to lend out larger loans and a lower down payment is needed, making this a lot more feasible for new homeowners. The only negative is that if one were to look for a new development they would need to search further away from the city core thus creating a long run problem of suburban sprawl.

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From a Toronto renter‟s perspective, they have also found rental properties to increase by 2-3%. For homeowners, utilities are a large part of the budget, but for renters many of the rents include utilities. With this inclusion many have the feeling of being “locked in” and are not as conscious on the amount of utilities they use. With respect to job security and its affect on an individuals‟ housing situation, it does play a large and crucial role. Especially if looking to upgrade to a larger unit/house, job security is one of the deciding factors. Many were in agreement that 10 years ago you were guaranteed a job, but not anymore. Many companies are beginning to downsize, having heavier reliance on technology. Companies offer less full time jobs and more contact / casual work. One of participants was ensured that she was guaranteed a job, but unsure of what type of job she will be doing in the fall. She adjusts and says that it is good to have a change in roles, as long as she is guaranteed a job, she doesn‟t have any concerns with the type of work she will be doing. A recent immigrant finds she has a lack of job security in the IT sector due to her Canadian status and the fluctuating IT market. For this reason, it has prolonged her and her husband from upgrading to a house from a rental unit. It is a personal responsibility to keep up to date with education and upgrade job skills to ensure job security and not be stuck within the “rat race”. Over the years, it has gotten much worse and less affordable to maintain a home. A reason for this could be because people constantly want to renovate their home, sell it and upgrade themselves to something better. There isn‟t the same attachment to a house as there once was; houses are seen as an investment rather than a long-term commitment. There is a higher request for houses, increasing the demand and thus increasing the price for these houses. One feels like the market has a cycle of 16 years and finds it‟s about

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time for the market to crash so he can upgrade to a house. Also the suggestion that lower housing prices would also benefit homeowners, as they would have lower property taxes. Strategies and Coping Skills It was unanimous that incomes in the last few years have not kept pace with rising housing costs. Many of the participants felt like they don‟t get the proper raises to help better afford their house. One finds that the increase in property taxes alone is more than the increase in income and that property taxes are the main factor that affects housing affordability. She cringes when she sees a „for sale‟ sign posted in her neighbourhood. When new homes go for sale, it leads to a price increase and then this increases property taxes for the neighbourhood. For example, her elderly aunt lives independently in her own home and wants to continue living there. Unfortunately, her property taxes have increased from $1,000/year to $3,800/year within the last few years. She is on a limited income and now has the only option to sell the home and downgrade. To be able to accommodate for these rising costs, the following are some suggested strategies to ensure their housing is affordable: rent out extra bedrooms for a second income a lower down payment having dual incomes

They have also experienced cutting back on household expenditures because of higher housing costs. Items such as shopping, entertainment, vacations, eating out and not being able to save as much money are a few things that are cut. Although many need to look for other sources of secondary income and cut back on luxury items, they would not tap into the current equity in the home to refinance or reduce debts. Feels like they would be

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moving backwards and starting back at square one. One mentioned that she wants to retain the equity in her house. With the interest rates increasing, it is not going to help with borrowing, would rather save less and hold off on renovations than to remortgage the house. One had deferred purchasing a car due to renovations and putting her nephew through university. Savings are just redirected to what needs to completed first. There were a few participants that were considering on moving due to affordability issues, upgrading and location. A couple, nearing retirement, wanted to move into a condominium apartment because of easier maintenance. The only “decent” ones they found cost over $400,000 and concluded it was much more affordable to continue living in their current home. Another reason for wanting to move is to change neighbourhoods. One wants to move closer to work, highways and closer to other amenities. His current drive to work is approximately 45 minutes but would prefer shorter. Impacts on Housing Costs There seems to always be a concern for possible increases in mortgage interest rates. Excluding the participants who are fortunate enough to have their mortgage paid off, the others adjust accordingly to the market. One takes the risk with a variable mortgage and finds an increase of $100/month due to the interest rates. In comparison with the United States, some find that Canada is much worse with regards to mortgages. The United States has tailor made mortgages and Canada doesn‟t have any innovative strategies to offer. Housing costs has also affected everyone‟s ability to regularly put money into savings and investments. One of the first expenditures that were cut was putting money

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into RRSP. Instead of investing into RRSP‟s, bonds or stocks, one would rather maintain their house through renovations, and this is seen as an investment. The goal is for the house to be the retirement fund. The costs of utilities and property taxes have a present and future issue with respect to housing affordability. All the participants recognize that maintenance, gas and water have increased. Due to old sewage systems, they have noticed their costs to nearly double. Before the water bill only covered plain water but now has added sewage costs. Cable, Internet and telephone costs have also increased. Another large cost is housing insurance. One participant‟s housing insurance used to cost $300, now it has increased to $575 even with the discount for the home alarm system. Increasing housing costs have kept the majority of participants deferring renovations to their home. When home renovations do take place, many have experienced unforeseen financial challenges mainly through cost overruns. For example, one had done interlock in their backyard, was originally quoted $5,000 but after completion it cost $7,000. The extra $2,000 needed put off other renovations to the house stretching out her maintenance program. Another example, one participant redid their roof. It ended up costing three times than what they had budgeted. Wanted to spend only $5,000 but at the end cost $15,000 for aluminum roofing. They had based their budget on previous quotations instead of current prices and there were many hidden costs involved. Due to the roof, they have postponed interlocking their driveway for the past 2 years and are aiming to have that done next year.

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Conclusions
Over the past decade, the housing market has seen significant changes with respect to affordability. Participants felt that housing prices, utilities, transportation costs and other indirect costs associated with housing are much less affordable on their income. Many of the houses located in the city centre are much too expensive for the average homebuyer and thus forces them to either live in rental units or further away from the centre. This will create a long run effect on the environment creating suburban sprawl, reducing our farmland and green space. Job security also directly affects potential homebuyers‟ decisions of whether to upgrade or downgrade their house. Although housing prices have increased significantly, homeownership has been easier to obtain. Developers are providing more incentives, banks are approving larger loans and a lower down payment is required to get into homeownership. Even with Toronto‟s strong housing market and steady interest rates, housing affordability is affecting all blue collar workers and middle class incomes. The focus group sessions helped emphasize our facts and outlined assumptions. More research will need to be carried out to get a full understanding of the complex “working poor”.

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Appendix 1 - Questions for Focus Group Participants
Introduction and Ethics The focus group will commence with a general welcome and overview of the project, including a brief background on CMHC. Discussion of ethics and the intent of the consultant to take notes, record and prepare a report based on the findings will then take place. Participants will be informed that their names will not be associated with any of the responses or direct quotations used in the report. We will then ask for verbal consent to proceed. The focus group discussion will commence with a round table introduction of participants and have them respond to a general question such as:  “As of today how would you describe the local housing market in Calgary?”

The above question is used simply as an ice-breaker and gives people the chance to comment on rising prices and potential challenges facing each centre** In each of the sections noted below, they will be prefaced with the comment that this study is about the middle income and their housing circumstances. Participants will be reminded that they too are part of the middle income. Section One: Housing Affordability 1) Has your housing situation become less affordable over the last five years? 2) Do prices today represent more of a challenge to buyers thinking about entering into homeownership (if so what do they face in buying a home today)? 3) What strategies are people using to ensure that their housing is affordable? 4) Are you considering changing (or have you changed) your place of residence recently due to affordability pressures or in reverse to trade up in the market? Section Two: Disposable Income 5) Does anyone feel they have had to cut back on household expenditures because of higher housing costs (probe for examples)? 6) Does anyone have concerns about possible increases in mortgage interest rates? 7) Have your housing costs affected your ability to regularly put money into savings and investments (for example, are you contributing to RRSPs, RESPS and other investments)? 8) Have your increases in incomes in the last few years kept pace with rising housing costs or contributed to your ability to better afford your housing? 9) What about other costs such as energy (heat and electricity etc) or property taxes….does anyone see these as a present or future issue with respect to housing affordability? 10) What about tapping into the current equity in the home through refinancing your mortgage to reduce household debt or undertake renovation. Is this seen as a viable option?

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Section Three: Housing Problems 11) To what extent have your housing costs prevented you from re-investing in your home through regular maintenance and repairs? What have been the impacts? Have you deferred desired or necessary renovations because your housing budget is squeezed? 12) On the reverse, have home renovation projects proven to be an “unforeseen” financial challenge through either cost overruns or perhaps increased debt load? Section Four: Conclusion and Future Expectation 13) Some parts of the labour market and the economy have shifted to greater dependency on contract work and short term appointments, along with more frequent changes in employment. Do any of you see these as problems in your profession or industry? Does job security affect your housing situation, especially in terms of affordability issues – now and into the future? 14) What about general affordability, do you feel it get harder to afford to not only buy but maintain a home? Can you comment on the experiences or perceptions that others like yourself might have about this challenge? 15) To what extent would you consider or perhaps did consider the local housing market prior to making a decision to move (e.g., did you examine the cost of housing vs. income vs. future employment or professional prospects etc)

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List of References
Bell, C.A. 2006. “Workforce Housing: The New Economic Imperative?” Housing Facts and Figures, Fannie Mae Foundation, Volume 4 Issue 2. Retrieved on September 8, 2006 from http://www.fanniemaefoundation.org/programs/hff/v4i2workforce.shtml CBC News. 2006. “Bank of Canada leaves interest rate unchanged” Retrieved on September 8, 2006 from: http://www.cbc.ca/story/money/national/2006/09/06/bankdecisionsept.html?ref=rss Canadian Council on Social Development. 2006. “Stats & Facts – Families: A Canadian Perspective.” Retrieved on September 8, 2006 from: http://www.ccsd.ca/factsheets/family/index.htm Chiru, R. 2005. “Does Inflation Vary with Income?” Statistics Canada, Pricing Division. Retrieved on September 9, 2006 from http://www.statcan.ca/english/research/11621-MIE/11-621-MIE2005030.htm#top Fleury, D & Fortin, M. 2005. “Canada‟s Working Poor.” Social Development Canada. Retrieved on September 8, 2006 from http://policyresearch.gc.ca/page.asp?pagenm=v7n2_art_09 Statistics Canada. 2006. “2001 Community Profile, Toronto.” Retrieved on September 8, 2006 from http://www12.statcan.ca/english/profil01/CP01/Details/Page.cfm?Lang=E&Geo1 =CSD&Code1=3520005&Geo2=PR&Code2=35&Data=Count&SearchText=toro nto&SearchType=Begins&SearchPR=35&B1=All&Custom= Weldon, F. 2004. “The Working Poor in Canada.” Social Development Canada

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