Wendell Cox

Wendell is based in St Louis, USA, and is visiting Professor at the Conservatoire National des Arts et Metiers, Paris.

Wendell is the author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life (2006)

He is a principal in Demographia, an international public policy firm with emphasis on land use policy, urbanization and housing affordability.

His colleague in Demographia is Hugh Pavletich of Pavletich Properties Ltd, Christchurch, New Zealand.

Wendell and Hugh are co-authors of the annual Demographia International Housing Affordability Survey, which is in its third edition.

Demographia has also developed the only list of world urban areas with a population of over 500,000, including data on land area and density. It is believed that the Demographia World Urban Areas is the only listing of its type in the world, and informs the Demographia World Urban Areas: 2007 & 2015 Projections.

Links to these publications are given below.

Website: www.demographia.com

e-mail: demographia@gmail.com

14.00 to 15.30 on Friday 18 May 2007

Town Planning: The Negative Externalities

Summary

This presentation will be a review of international housing affordability from the Demographia Surveys, and the causes of the recent housing affordability losses.

• Negative Externality 1: Higher Housing Costs
• Negative Externality 2: Less Mobility and Access
• Negative Externality 3: Declining Quality of Life

The depth of the economic losses will be estimated and the social consequences will be discussed.

Town Planning: The Negative Externalities

The following Demographia Surveys will be referred to, and are available to download as background reading:

Demographia World Urban Areas: Latest Population, Density & Land Area Estimates (March 2007) 1.04MB

This survey contains data for all 707 identified urban areas (urban agglomerations or urbanized areas) with a population of 500,000 or more. A number of additional urban areas are also listed, including all urban areas over 100,000 in France, New Zealand, Puerto Rico, the United Kingdom and the United States, and all urban areas over 50,000 in Australia and Canada.

Rankings are indicated for urban areas of 500,000 and over. A total of 1,302 urban areas are included in the lists. It is estimated that the urban areas with over 500,000 population account for 44.3 percent of the world's urban population as of 2002. All of the urban areas in the list account for 48.7 percent of the world's urban population.

Demographia World Urban Areas: 2007 & 2020 Projections (March 2007) 581KB

Based on the Demographia World Urban Areas survey for 2007, this additional survey contains all urban areas projected to have more than a population of 2,000,000 by 2020.

Demographia International Housing Affordability Survey (January 2007) 470KB

To achieve the internationally accepted standard of housing affordability, house prices should not exceed three times annual household income. Demographia uses the internationally recognised standard of the Median Multiple to rate housing affordability. In this method the median house prices of each individual market are divided by the median annual gross household income of that particular market. This method of assessing affordability is recommended by the United Nations and the World Bank.

Demographia has four categories of housing affordability. Those that require three (3.0) years or less annual median household income are rated “affordable”; four (4.0) and below “moderately unaffordable”; five (5) and below “seriously unaffordable” and above five years (5) annual income “severely unaffordable”.

This international survey on housing affordability has found that 21 out of 23 markets in the UK are either "severely" or "seriously" unaffordable. The national affordability Median Multiple for the UK is nearly double internationally accepted "affordable" levels.

The survey also showed that the cost, including mortgage interest, of the median priced house in England has risen more than £200,000 compared to the Median Multiple in 1996. This equates to an increase of approximately seven years of additional gross income for the median income household.

The third Demographia International Survey on housing affordability, across 159 major urban markets in six countries, found that 42 are affordable; 36 moderately unaffordable; 22 seriously unaffordable and 59 severely unaffordable. None of the surveyed urban markets of Australia, Ireland, the United Kingdom and New Zealand achieve affordability.

All the affordable markets are in North America, with 35 in the United States and 7 in Canada. There are 28 moderately unaffordable markets in the United States, 6 in Canada and 2 in the United Kingdom. Of the 22 seriously unaffordable markets, 17 are in the United States, 2 each in Canada and the United Kingdom, with one in Australia.

There are 59 severely unaffordable markets, where the house prices exceed five times annual median household earnings; 27 of these are in the United States, 19 in the United Kingdom, 7 in Australia and 2 in Canada.

All 3 major urban markets in New Zealand are rated severely unaffordable.

Overall Canada achieves the best performance, where its citizens only require 3.2 years of annual income to purchase a home. In the United States it takes 3.7 years; Britain 5.5 years; Ireland 5.7 years; and New Zealand 6 years. Australians fear the worst, crippled with the burden of 6.6 years of income on average to house themselves.

These “years of income” required to purchase a house within individual markets is understated, because the majority of house purchasers require mortgages and interest charges tend to more than double the full cost of a house. The survey sets out the purchase cost and interest charges within each country that new home purchasers face today, and in comparison with their counterparts ten years ago.

This survey outlines the international research, political concern, and growing consensus evolving during 2006. The survey suggests 7 key areas that need to be focused on so that housing affordability is restored within the markets currently experiencing housing stress. They are:

• Housing Affordability Targets
• Liberalizing Land Use Processes
• Minimizing Peripheral Land Price Distortions
• Equitable Infrastructure Finance
• Economic Impact Analyses
• Professional Education
• Research

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