Poverty in Canada (2nd Edition)

Shelter

THE SHARP INCREASE IN REAL estate prices during the 1980s prompted a surge in media stories on the issue of shelter "affordability." A common theme in these pieces was that home ownership is increasingly an unrealistic goal for young Canadian families. The high cost of a house combined with high interest rates condemned, we were told, most middle and lower income households to lifelong tenancy. And even renters did not escape the effects of real estate inflation. Greedy landlords found ways, in spite of rent controls, to sharply raise the rents many tenants paid.

When asked, economists explained that the real estate boom was, in large part, a demographic phenomenon. During the 1980s most "baby boomers" came of home-buying age and a surge in demand for houses was expected. As well the steady reduction in the average size of Canadian households, due mainly to lower birthrates and increasing rates of family breakdown, added to the demand for homes. Finally, heavy offshore investment in Canadian real estate, especially in Toronto, pushed prices up further in already overheated markets. These explanations and concomitant analyses indicating that the boom would be temporary were downplayed or ignored. The "crisis" in affordable housing was a good story.

The evidence is clearly inconsistent with the media hype. In spite of the boom, most housing in Canada can fairly be described as "low cost" and is eminently affordable. In 1986, for example, 54 percent of tenants paid a gross rent of less than $400 per month and 10 percent of tenants paid less than $200 per month. [Statistics Canada, 1986 Census of Canada, table HH86B02.] Homeowners fared even better. In 1986, almost 24 percent of all Canadian homeowners had basic shelter costs (mortgage, taxes, hydro, heat and water) of less than $200 per month and for another 30 percent, these costs were between $200-$400 per month. [Ibid, table HH86B02.] So for more than half of Canadian households, shelter costs were less than $4,800 in 1986.

By 1989, arguably the peak of the real estate boom, the situation for tenants was unchanged. Fifty-six percent paid average monthly cash rent of $450 or less. For the lowest income group, households with 1988 income less than $10,000, average cash rent was $318 per month. [Statistics Canada, Household Facilities by Income and Other Characteristics, 1990, cat. 13-218, table 12, p. 162.] As expected, young tenants had most difficulty handling the rent. Almost 18 percent of households whose head was less than 25 years old paid more than 50 percent of income on rents. Overall, however, young tenants paid an average of 22 percent of income in cash rents during 1989. [Ibid, table 14, p. 164.Note] Affordable rental housing, even for the most vulnerable group, is not a myth.

The exaggeration of the costs of home ownership in Canada is largely due to the media's "Toronto bias." The young couple facing a $150,000 mortgage and monthly payments of $1,600 are seen as clear evidence that home ownership is an impossible dream for all but the wealthy. These examples are typically drawn from the hottest real estate market in Canada. In point of fact, however, outside of Metropolitan Toronto, the price of a three-bedroom, 1˝ bath, detached bungalow averaged about $100,000 in 1988. [Royal Lepage, Survey of Canadian House prices, 1989.] Townhouse and semi-detached homes averaged less than that. The typical household in Canada, with 1988 gross income of about $38,000 can afford the average home. Just looking at initial mortgage payments also distorts the issue of affordability. Because of inflation, mortgage payments decline as a proportion of income over time. Today's $100,000 home was about $50,000 ten years ago and homeowners who bought then currently have monthly mortgage payments of between $350 and $400. The first few years of a new mortgage are always the most difficult and require the greatest sacrifice.

The belief that only the well off own their own homes is incorrect. In 1988, about 44 percent of families whose total reported income was less than $15,000 were homeowners, 72 percent of which were mortgage free. [Calculated using information in Statistics Canada, Income Distributions by Size, 1988, table 20, p. 89.] Curiously, almost one-quarter (23 percent) of mortgage free homeowners were "poor" by CCSD standards (i.e., earned less than half the average income). [Ibid.] While it is true that the majority of lower income households are tenants, this is largely explained by the life-cycle pattern of incomes. In 1986, roughly 46 percent of all tenancies were headed by someone under 35 years of age whereas only 17 percent of homeowners were headed by someone under 35. [Statistics Canada, Family Expenditure in Canada, 1986, cat 62-555, table 7, p. 70.]

Over the years, home ownership has been an achievable goal for the vast majority of Canadians. Lower income families have used a variety of strategies to attain this end. Some have purchased duplexes and rented out half of the space. Others have purchased "starter" two bedroom bungalows or "handy-man" specials and have done their own repair and landscape work. Still others have built or helped build their own homes and thus dramatically reduced the overall cost. The purchase of mobile homes, more common in the U.S. than here, has nevertheless been used by some Canadians as a stepping stone to more substantial housing or as a low cost alternative to tenancy. Currently, just over 1 percent of Canadian households live in mobile homes. [Statistics Canada, 1986 Census of Canada, table DW861-301.] These and other methods continue to be used as ways of accomplishing home ownership for low income Canadians.

An estimate of the monthly costs of housing for several of the above options in an average sized, average cost, Ontario city [North Bay, Ontario. According to the Royal Lepage survey, in 1988 North Bay had average resale house prices just slightly above the Canadian average.] in 1988 is given in table 6-1. These values represent an approximation of the relevant first year costs facing prospective buyers seeking an alternative to tenancy. It is worth repeating that these costs decline relative to income each and every year due to wage inflation. For example, in the city of North Bay, in 1988, the average cost of a 2 bedroom starter home was about $60,000. Assuming a conventional mortgage and estimating associated costs such as property taxes, insurance, water fees, heat, electricity and repairs, the monthly cost to carry this house is approximately $600. This is fully 25 percent above the average monthly rent of a 2 bedroom apartment in North Bay during 1988. If both rents and non-mortgage housing costs rise, on average, by 5 percent per year then after 7 years the cost of the starter home and the apartment will be about the same. After 12 years, the apartment will cost 16 percent more, on a monthly basis, than the home.

Table 6-1: Shelter cost calculations of various alternatives to tenancy ($)
	Duplex (2-2bdrm)	2 Bdrm Starter Home	Mobile Home
Approximate Average 1988 Purchase Price (including related fees)	$80,000	$60,000	$30,000
Mortgage Loan (Assuming 25% Down payment)	60,000	45,000	22,500
Monthly Mortgage Payment (Assuming 3 year term @ 10%)	557	418	209
Income from Duplex	(405)	—	—
Estimated Cost of All Utilities (Heat, Hydro, Water) plus Taxes, Insurance and Repairs	300	182	150*
Total Monthly Cost:	452	600	359
*Includes space lease fees.

While there exists no systematic price information on duplexes, starter homes and mobile homes for various parts of Canada, Royal Lepage does publish, annually, estimates (based on MLS listings) of fair market value of a 3 bedroom bungalow in most Canadian cities. This unit is the quintessential working class home. What is most interesting is the differences in the cost of these houses in different areas of Canada. Table 6-2 displays these costs for Canada's major metropolitan areas for 1978, 1983 and 1988. The percentage rise in prices and the current relation to the Toronto price as a percentage are both given. It can be argued that these percentages roughly reflect the differentials in lower cost owned accommodation as well.

Table 6-2: 3 bedroom bungalow—recent average prices in major Canadian cities ($)
City	Fall 1978	Fall 1983	Fall 1988	10 year growth rate (%)	Percentage of 1988 Toronto price
St. John's	$49,500	$70,000	$92,900	88%	41%
Charlottetown	44,500	65,000	92,000	107	41
Halifax		124,000	132,000	—	58
Moncton	39,500	52,500	76,000	92	34
Fredricton	45,000	64,000	84,000	87	37
Quebec	52,500	63,000	93,000	77	41
Trois Rivieres	37,000	48,000	67,000	81	30
Shawinigan	37,000	38,000	55,000	47	24
Montreal	40,000	67,500	105,000	163	46
Hull	42,000	69,000	110,000	162	49
Ottawa		106,000	128,000	—	57
Kingston	49,500	64,000	112,000	126	49
Toronto (Scarborough)	68,500	101,000	226,500	231	100
Hamilton	58,000	64000	120,000	107	53
Kitchener	55,500	74,000	132,000	138	58
London	53,000	70,500	124,000	134	55
Windsor	60,500	55,250	84,000	39	37
North Bay	46,000	57,500	112000	143	49
Sudbury	54,000	47,500	98,000	81	43
Thunder Bay	70,000	82,000	125,000	79	55
Winnipeg	57,000	77,000	107,000	88	47
Regina	57,000	85,000	89,000	56	39
Saskatoon	61,000	78,000	86,250	41	38
Lethbridge	64,000	83,500	85,680	34	38
Calgary		102,000	112,500	—	50
Edmonton	79000	82,500	90,000	14	40
Kelowna	49,000	72,000	79,000	61	35
Vancouver	74,500	128,000	160,000	115	71
Victoria	63,500	103,000	117,000	84	52
Source:Royal Lepage, Historical Information on Canadian Housing, Summer, 1989.

While low cost home ownership strategies are valid for some low income individuals and families, the dominant mode of shelter for "poor" Canadians is rental accommodation. People with very low incomes are unlikely to be able to provide the required downpayment on a home and are even less likely to qualify for a mortgage loan. Indeed, about 75 percent of households with 1988 income below $12,500 were renters. [Statistics Canada, Income Distributions by Size in Canada, 1988, cat 13-207, table 42, p. 115.]

Essential shelter costs

The cost of rental accommodation varies widely depending chiefly on quality of unit, size of unit and location. Low income renters necessarily end up with less expensive accommodation. It would not be inappropriate to assume that "poor" families would be selecting accommodation from the least expensive half of the rental market. While low vacancy rates in some areas may delay this process somewhat, low incomes ultimately constrain the poor to acquire units with below average rents. How much below average? CMHC publishes rent ranges for major metropolitan areas and this information indicates that the average of the bottom 50 percent of rents is approximately 10 percent below the overall average. [CMHC, Rental Market Surveys, various cities, 1987.] Using this rough estimate as a rule of thumb we shall assume that essential shelter costs in a particular community will be 10 percent below the average for any given size of rental accommodation.

What size of rental accommodation is adequate? The Montreal Diet Dispensary (MDD) has developed a guideline for matching apartment size to size of family and I adopt it here with minor modification. [Montreal Diet Dispensary, Budget Guidelines, 1988, appendix I, "Guide For Shelter Requirements Pertaining to Family Size."] Specifically, a bachelor apartment is appropriate for a household of one person, a one bedroom for 2 persons, a two bedroom for 3 persons and a three bedroom for 4 or more persons.

The Canada Mortgage and Housing Corporation (CMHC) publishes biannually average monthly rents by size of apartment in apartment blocks with six or more units for all metropolitan areas in Canada with population of 50,000 or more. [CMHC, HMIS R508.] These communities represent about two-thirds of the Canadian population. The rents paid by the remaining third, about 8 million people, will not be adequately represented by rents in metropolitan areas. We expect that families living in the thousands of smaller cities, towns and rural areas would pay lower rents, perhaps substantially lower, than are paid in urban centers. This issue is best put aside until later.

Table 6-3 displays average monthly rents by type of apartment in October, 1988 for all of the major metropolitan centers in Canada. The first grouping of 26 cities are the larger urban agglomerations while the second grouping lists 27 smaller metropolitan areas. Both lists are presented in alphabetical order. Using the MDD guideline to match apartment size and family size and employing our rule of thumb that low income families pay 10 percent below average rents, we can determine the necessary shelter costs for various communities by family size. This is presented in table 6-4.

Table 6-3: Average Monthly Rents ($) in Apartments of 6 or More Units by Major City (CMA) and Apartment Size—October, 1988
CMAs	Population (1986)	Apartment Size
		Bachelor	1	2	3
Calgary	671,326	$312	$407	$523	$583
Chicoutimi	158,468	279	333	391	421
Edmonton	785,465	313	396	482	530
Halifax	295,990	398	463	551	664
Hamilton	557,029	312	389	472	594
Hull	200,215	343	416	465	524
Kitchener	311,195	329	397	475	595
London	342,302	329	411	510	629
Montreal	2,921,357	354	440	510	600
Oshawa	203,543	444	486	540	596
Ottawa	619,050	371	471	594	709
Quebec	603,267	336	426	476	549
Regina	186,521	260	396	490	576
St. Catherines	343,258	295	404	464	529
Saint John	121,265	289	338	390	427
St. John's	161,901	380	451	515	542
Saskatoon	200,665	274	376	449	511
Sherbrooke	129,960	263	325	381	452
Sudbury	148,877	333	400	464	497
Thunder Bay	122,217	283	430	540	577
Toronto	3,427,168	409	493	596	738
Trois-Rivieres	128,888	312	362	370	408
Vancouver	1,380,729	399	482	631	740
Victoria	255,547	326	397	515	543
Windsor	253,988	$277	$419	$541	$521
Winnipeg	625,304	317	417	518	622

Table 6-4: Essential annual shelter costs ($)—1988 by major city and family size
	Family Size
Cities	1	2	3	4	5	6
Calgary	$3,404	$4,440	$5,705	$6,360	$6,360	$6,360
Chicoutimi	3,044	3,633	4,265	4,593	4,593	4,593
Edmonton	3,415	4,320	5,258	5,782	5,782	5,782
Halifax	4,342	5,051	6,011	7,244	7,244	7,244
Hamilton	3,404	4,244	5,149	6,480	6,480	6,480
Hull	3,742	4,538	5,073	5,716	5,716	5,716
Kitchener	3,589	4,331	5,182	6,491	6,491	6,491
London	3,589	4,484	5,564	6,862	6,862	6,862
Montreal	3,862	4,800	5,564	6,545	6,545	6,545
Oshawa	4,844	5,302	5,891	6,502	6,502	6,502
Ottawa	4,047	5,138	6,480	7,735	7,735	7,735
Quebec	3,665	4,647	5,193	5,989	5,989	5,989
Regina	2,836	4,320	5,345	6,284	6,284	6,284
St. Catherines	3,218	4,407	5,062	5,771	5,771	5,771
Saint John	3,153	3,687	4,255	4,658	4,658	4,658
St. John's	4,145	4,920	5,618	5,913	5,913	5,913
Saskatoon	2,989	4,102	4,898	5,575	5,575	5,575
Sherbrooke	2,869	3,545	4,156	4,931	4,931	4,931
Sudbury	3,633	4,364	5,062	5,422	5,422	5,422
Thunder Bay	3,087	4,691	5,891	6,295	6,295	6,295
Toronto	4,462	5,378	6,502	8,051	8,051	8,051
Trois-Rivieres	3,404	3,949	4,036	4,451	4,451	4,451
Vancouver	4,353	5,258	6,884	8,073	8,073	8,073
Victoria	3,556	4,331	5,618	5,924	5,924	5,924
Windsor	$3,022	$4,571	$5,902	$5,684	$5,684	$5,684
Winnipeg	3,458	4,549	5,651	6,785	6,785	6,785

These values represent the average costs that low income Canadians could reasonably expect to pay for accommodation appropriate to family size in the various communities listed. What about rental costs in smaller places? If we are interested in determining essential shelter costs for all parts of Canada we must somehow factor in those communities with less than 50,000 population that have so far been omitted. As might be expected information regarding these smaller communities is far less satisfactory than data on major urban centers. Nevertheless, what is available does appear to confirm our hypothesis that rents are lower in smaller places.

The CMHC conducted a rent survey of census agglomerations (CA's) with populations between 10,000 and 49,999 in October 1988. These smaller communities account for about 2.2 million of our 1986 population. Table 6-5 presents the provincial averages drawn from the survey. In every province the average rent in small CAs is below, often substantially, the average rent in large CAs. Indeed, rents in most smaller communities tend to be at or below levels in the least expensive larger community within a province.

Table 6-5: Provincial average monthly rents ($) in apartments of 6 or more units, in CAs between 10,000 and 49,999, in October 1988
Province	Number of communities included	Bachelor	One Bdrm	Two Bdrm	Three Bdrm
Newfoundland	4	$302	$353	$385	$426
P.E.I.	1	245	381	423	462
Nova Scotia	2	238	337	432	445
New Brunswick	3	245	303	368	347
Quebec	23	242	300	345	377
Ontario	27	292	377	454	515
Manitoba	4	296	378	448	501
Saskatchewan	7	244	350	434	484
Alberta	5	333	364	428	487
B.C.	18	251	313	365	417
Source: CMHC, Ottawa, special survey.

There remains, of course, about 25 percent of the population that reside in communities or rural areas with populations smaller than 10,000. The great majority of these households are homeowners, 63 percent of whom own mortgage free. [Statistics Canada, Household Facilities by Income and Other Characteristics, 1989, table 2.4, p. 84.] The roughly 13 percent who do rent very likely have shelter costs no higher than those in the smaller CAs. One of the attractions of rural living has always been lower cost accommodation. In the absence of any data on these rents, we assume, for the purposes of this study, that rents in smaller communities within a province will, on average, be no higher than rents in the least expensive CA within the same province. This assumption permits inclusion of smaller areas when provincial average rents are required. It would be quite incorrect to assume that average urban rents are reasonably representative of rents in smaller communities.

An obvious question regarding these published rents is what they include. While some rental agreements involve a single monthly fee covering heat and electricity, others specify that tenants pay their own utilities. Unfortunately, CMHC data involves just "stated" rents, some of which would cover utilities and others which would not. There is no way to determine what proportion of the stated rents include all or even some utilities. CMHC analysts have declined to estimate the proportion that includes utilities. Clearly, if very few of the stated rents include all utilities, then the values in table 6-4 underestimate to some extent the true essential shelter costs.

A survey of apartment listings in the City of North Bay during 1988 yields some relevant information. [Conducted by the author. Fifteen different days covering every month of the year were randomly selected. Every apartment listing in the city's only newspaper was recorded and categorized according to size, utilities included and price.] Forty three percent of the listings specifically included all utilities in the stated rent, 10 percent specified that utilities were extra, 17 percent stated that only hydro was extra and 30 percent did not specify anything regarding utilities. Surprisingly, in a comparison of the rents of those units which included all utilities and those excluding all utilities, the average rents of the latter exceeded the former in every type of apartment except the three bedroom. On a typical day there were about 50 listings which represents less than 1 percent of the average 1988 rental stock. [Information regarding the stock of rental housing in the City of North Bay was obtained from the City of North Bay Housing Report, Planning and Development Department, June 1989.] However, overall, fully 25 percent of listings were unfilled after one week. This information is relevant to one community in 1988 and may or may not reflect the situation at other times and in other areas in Canada. These data do serve, however, to cast some doubt on the view that CMHC stated rents underestimate true shelter costs.

Rent controls directly affect both affordability and availability of rented accommodation. The purpose of rent controls is to hold down the rate of increase in rents that would otherwise occur due to market forces. It is supposed to be a way of maintaining affordable shelter. Because rent controls result in shortages of rental accommodation, however, affordability is achieved at the expense of availability. Low vacancy rates, little or no unsubsidized construction of new units and conversions (legal and illegal) to uncontrolled uses are all consequences of a controlled rental market. In fact, even affordability is somewhat elusive. While we do have many apartments renting well below fair market value, in tight markets few are likely to be occupied by low income tenants. They rarely have the time, resources or connections to find these gems. Because of artificial shortages, tenants of modest means often encounter large search costs and when they find an "affordable" unit it is likely to be poorer quality than they would otherwise expect. Rent controls are a most inefficient way to deal with the problem of rapid rent increases. Ultimately they benefit only well off, long term renters. They adversely affect the stock of rental accommodation and are especially harmful to low income tenants.

All things considered, the values in table 6-4 are a reasonable estimate of essential shelter costs in various Canadian communities in 1988. They represent costs that low income households could expect to pay, on average, for rental accommodation. There are several exceptions however. Mortgage-free homeowners, students living in residences or sharing accommodation and people living in subsidized, rent-geared-to-income housing would all have shelter costs substantially lower than are given in the table. These exceptions are dealt with in greater detail in chapter 9.

Some will argue that the costs in table 6-4 underestimate the amounts that some low income tenants must pay for rental accommodation because low vacancy rates in many cities force tenants to take more expensive apartments. A critical evaluation of this issue is treated in chapter 10. As well, the problem of homelessness and its relation to the private rental market is taken up in chapter 10.

Other necessities

Food and shelter are the most basic necessities. The absence of either one seriously jeopardizes physical well-being. There is no debate that people, wherever they live, are poor if they cannot afford (or cannot somehow acquire) these core necessities on an on-going basis. Applying the criterion that a necessity is anything that a person requires to continually maintain physical well-being, the list of "other necessities" must include: clothing, transportation, personal hygiene needs, health care and household items.

Clothing

Over the years, low income Canadians have used a variety of strategies to clothe themselves. Sewing and knitting some clothing items, hand-me-downs within and between families, and the purchase of second hand clothing are all ways that poor individuals and families have used to economize on clothing. Indeed it is fair to say that these strategies transcended social class and were characteristic of most Canadian families a generation ago. While the need to economize has diminished as real incomes have grown, these and other ways to reduce clothing costs continue to be used. [The most destitute families have, for some time, been able to receive most of their clothing free. For example, in November 1990, the United Way in Toronto expected to give away 25,000 coats to needy children. Similar drives exist for footwear and other clothing items. Charitable gifts of clothing to the needy is common, formally or informally, in every community in the country.] In recent years "sales" and "specials" on clothing and footwear have become perhaps the most popular way that families use to cut costs. Unlike food, the purchase of most clothing items is "postponable" and this provides shoppers with greater scope to benefit from the frequent sales in the apparel and footwear industry.

Beyond defining adequate clothing as clothing and footwear which is intact, reasonably in style and appropriate to the season, it is difficult to generalize about the quantity and quality of clothing that is essential. It should be possible to rigorously estimate basic needs in this area based on normal usage by age and gender. However, in the absence of any such published information, I will use the estimates provided by the Montreal Diet Dispensary, albeit with some reluctance.

The MDD has developed lists of basic clothing items by age and gender which they suggest are "minimum adequate." Some items on the list are clearly outdated (the list is unchanged since 1959) and other items reveal gender bias (i.e., bathing suit for women, not for men). In addition, there is no justification provided for the quantities used. Nevertheless, the lists seem in general to be reasonable and in no way would be regarded as insufficient. Using prices derived from the 1988 Sears and Eaton's catalogues, the MDD estimates that clothing costs are approximately $245 per person per year.

This value is exclusive of provincial sales tax. In Quebec, all clothing and footwear are entirely exempt from the sales tax. Overall, six provinces (representing 46 percent of the population) exempt all clothing and footwear from sales tax. All provinces exempt children's clothing. Similarly, all provinces exempt yarns, fabrics, patterns, and other sewing accessories used to make clothes. It is true that about half of Canadian adults will pay between $15 and $30 per year more on clothing than the MDD estimates due to provincial sales taxes. However, low income families, out of necessity, use a variety of strategies which tend to lower clothing costs. For example, the "on sale" purchases of one pair of shoes or one pair of pants will save most or all of the amount spent on sales tax. The MDD calculations explicitly exclude all economizing practices and to that extent, they overestimate necessary clothing costs. Therefore, on net, we do not expect the MDD value to be an underestimate even in those provinces that tax adult clothing. We will use the MDD average of $245 per person per year as our 1988 necessary clothing costs.

Transportation

Essential transportation costs depend largely on two factors: whether or not one is employed and the distance between home and place of employment or shopping. While many city dwellers are able to walk to work or shopping or both, there are also many who require public transit. [In terms of economy, public transit wins hands down over the automobile.] Assuming an average 1988 fare of $1 per trip and two shopping trips per week, there are several cases, presented in table 6-6, to be considered.

Table 6-6: Transportation costs—various cases, 1988
Case	Employed	Bus/Walk To Work	Bus/Walk To Shopping	Annual Cost
I	Yes	bus	bus	$718*
II	Yes	bus	walk	$520
III	Yes	walk	bus	$208
IV	No	—	bus	$208
V	No	—	walk	0
*Assuming 5 statutory holidays per year.

Some readers may regard cases I, II, and III as irrelevant, arguing that the poor must be unemployed. However likely that may be, there can be other possibilities. For example, there are undoubtedly people supporting several children (and possibly another adult) earning at or just above the minimum wage. It may well be that their income does not cover all necessary expenses. As well, there are some who were employed for part but not all of the year and whose income is insufficient to cover necessities. So employed persons should be included in these calculations. How heavily they should be weighted is another question and one which this study essentially ignores.

For convenience we treat each case equally and therefore select the mid point of the range (i.e., $359) as representing the necessary cost of transportation for the average household while keeping in mind that there will be special cases in which costs may be substantially different. Two such cases that come immediately to mind are the elderly and residents of small communities. Necessary transportation costs of the low income elderly are likely to be somewhat lower because most seniors are retired from work and some municipalities offer reduced fee or free transit to seniors. On the other hand, low income families in rural areas must often pay significantly more for transportation because of the large distances to jobs and shopping and because of the unavailability of public transit. It is expected however that the lower cost of housing in these areas completely offsets the higher transportation costs.

Personal hygiene

The cost of personal hygiene and health needs vary widely between people. When cosmetics, perfumes and hair styling services are included, this category of expenditure has a relatively high income elasticity. However, if we limit the discussion to essential hygiene items, it is doubtful that anyone would include such products. They cannot be regarded as necessary to the long term physical well being of the user. [The issue of hairstyling and haircutting is a difficult one. The decline in the number of barbers and the increase in sales of barber kits indicates that many households, including middle class families, are cutting their own hair. Some prominent Canadian executives, including Ken Thompson, always have their spouses cut their hair (see Peter Newman's Merchant Princes). For this reason I have not included haircuts anywhere in "other" necessities.]

I begin with a "core" list of hygiene products common to all families and which undoubtedly account for the bulk of expenditures on necessary personal care. Included are: personal soap, shampoo, deodorant, facial and bathroom tissue and oral hygiene products. In 1986, average family expenditure on these items was $229. [FAMEX, 1986, table 20, p. 149-155.] Assuming that the average family in Canada is spending an adequate but not excessive amount on these personal care items to maintain good hygiene, it would be reasonable to use this value as a proxy for necessary basic hygiene costs. Using the change in the overall C.P.I. to adjust for inflation, this expenditure would be $249.61 in 1988. On a per person basis the annual (1988) cost is $91.77.

Now, in addition to these "core" hygiene needs, there are additional necessary items related to a person's age or gender. Included here would be diapers, bandages, pain remedy, electric shaver (and annual replacement screen), hair brush, nail clipper/filer, feminine hygiene products, condoms, powders, ointments, etc. Using 1986 FAMEX data (which reports on most of these items) plus an estimate based on 1988 prices [Taken from a national drug store chain, Shoppers Drug Mart.] (where no FAMEX data was available), the 1988 cost of these additional items for the average person would be just over $100. [Included in these calculations is a subjective estimate of the expected life of some items (shavers, brushes, etc.)] Therefore, the total necessary cost of personal care and hygiene in 1988 would be approximately $200 for an average person.

Household items

Table 6-7 displays a list of necessary household items and the corresponding average family expenditure (1986). These items are sufficient to maintain household cleanliness on an ongoing basis. The 1988 cost would be approximately $280 for an average family or roughly $103 per person. Added to this would be an estimated per person laundromat cost of $52 (one load per two persons per week).

Table 6-7: Essential household items, average annual family expenditure, 1986
Item	Cost ($)
Detergents and soaps (excluding personal)	$110
Cleaning powders	14
Paper towels	28
Plastic garbage bags	25
Light bulbs	16
Sheets and pillow cases	23
Table cloths, napkins	8
Towels, washcloths, etc.	19
Brooms, brushes, mops	14
Total	257
Source: Statistics Canada, FAMEX (1986).

In addition to these necessary household items, basic telephone service has come to be regarded as essential if only because it links the household to the community's emergency services. Apparently the cost of this service varies substantially across the country with the overall Canadian average estimated to be $172 per year. [Montreal Diet Dispensary estimate, Budgeting for Minimum Adequate Standard of Living, Canadian average, 1988, p. 32.] The annualized cost of a name brand telephone with an expected useful life of five years is approximately $5. [G.E. "Telemax" telephone, including 8 percent sales tax. Prices obtained from Consumers Distributing Catalogue, Fall 1989.]

Finally, there is the question of household furnishings. Expenditures on furniture and appliances vary considerably between households and this is largely explained by income differences. The following items are basic to all households and can be regarded as essential: bedroom dresser, bed (box spring, mattress, frame), mattress cover, bedspread/duvet, [Bed sheets have already been included under household items.] flannelette blanket, chesterfield set, coffee table, kitchen table set, dishes, pots and pans, flatware, toaster. In some cases, low income families receive many of these items as gifts from family, friends or charitable groups. In other cases, they purchase these items second hand at thrift outlets, flea markets, garage sales and used furniture stores. In still other cases, items are purchased brand new. However, it is reasonable to expect that donated furniture and second hand items would have a somewhat shorter useful life than new furniture. This generalization clearly does not hold for well-built antiques.

One relatively simple way to adequately represent the annual cost of home furnishings is to determine the average annual cost of new furniture by dividing the 1988 price by the expected useful life of the item. Assuming a staggered acquisition of new furniture items and a balance of donated and used furnishings, the pattern on which these estimates are based need present no cash flow problems.

Some of the costs of home furnishings, such as bedroom items, will vary with the number of persons in the household while other costs (kitchen and living room) will be largely independent of the number of persons. It is reasonable, for example, to assume that each person in the household requires one complete set of bedroom furnishings. While this assumption ignores some scale economies in the bedroom, it does, I believe, reflect a minimum adequate standard and, as well, fairly represents the situation of many low income single parent families.

Table 6-8 below summarizes the calculation of the average annual cost of our list of (newly purchased) furniture for households of various sizes. All prices were taken from the 1988 Sears catalogue. One can argue that each of these items would cost substantially less at discount department stores; however, I believe a case can be made that price reflects the quality and durability of an item and that cheaper furnishings will have a much shorter life expectancy. The values in the table include 8 percent sales tax which is approximately the average rate in Canada weighted by provincial populations.

Table 6-8: Costs of new essential furnishings, 1988, by family size
Family Size	Annual Living Room & Kitchen Costs ($)	Annual Bedroom Costs ($)	Total ($)
1	$71.01	$31.43	$102.44
2	71.01	62.86	133.87
3	75.30	94.28	169.58
4	75.30	125.71	201.01
5	80.19	157.14	237.33
6	80.19	188.57	268.76
Source: 1988 Sears Catalogue (Canada).

The omission of some items requires an explanation. Health care is clearly a basic necessity. In all Canadian provinces premium assistance was available in 1988 to low income citizens. We assume therefore that those defined as poor would not have to pay for coverage and would receive all the routine and emergency medical benefits provided by the health insurance program. In the case of dental care, this same health insurance covers emergency treatment. As well, dental societies in all major centers provide free dental services to the poor. Similarly, people with vision problems receive free annual eye examinations under provincial health plans and Lions Clubs across Canada provide free eyeglasses to needy individuals. [At this stage, I have not discussed provincial welfare programs. In chapter 10, we will see that social assistance in every province extends to health insurance as well as dental and vision care.]

Textbooks are provided in our public secondary schools, but students are normally responsible for their own supplies such as pens, pencils, notebooks, etc. The relatively minor costs of such items is assumed to be offset by part-time or summer earnings. All required school supplies are generally provided by schools at the primary level.

Throughout the discussion of "other" necessities, we have estimated costs for a "normal" or "typical" household. There are, of course, people with special needs and these requirements may or may not be met by existing public and private sources of assistance. Nevertheless, it would be inappropriate to consider the costs of the various special needs as part of a discussion of basic necessities. It is preferable to treat them as special cases and then assess income adequacy of the particular situation. This issue is taken up again in chapter 10.

Table 6-9 below provides an itemized summary of the cost of "other" necessities by family size. These costs are representative of all of Canada and are not adjusted for different communities or regions. This is justified because, in large part, Canadian average costs or prices have been used in our calculations. Specifically, clothing and home furnishing costs were taken from the catalogues of national department stores. Transportation costs are based on the maximum transit fees in our large cities. Much of the cost of personal hygiene and household cleaning supplies is based on overall Canadian average family expenditure (FAMEX) patterns for 1986 and inflation adjusted to 1988. The rest of the cost of items in those categories is based on prices at a nation-wide drug store chain. Finally, the cost of basic telephone service is a national average as estimated by the MDD.

Table 6-9: Other necessities summary chart—1988 costs by family size ($)
Category	Size of Family
	1	2	3	4	5	6
Clothing	$245	$490	$735	$980	$1,225	$1,470
Transportation	359	359	359	359	359	359
Personal Hygiene	200	400	600	800	1,000	1,200
Household Needs:
a) Cleaning/ Maintenance	155	310	465	620	775	930
b) Telephone	177	177	177	177	177	177
c) Home Furnishings	103	134	170	201	237	269
Totals	1,239	1,870	2,506	3,137	3,773	4,405