Hamilton has one of the biggest gaps in the country between average household income and the average price of a house — and that gap is growing.

Only Vancouver, Victoria, Montreal and Toronto had higher income-to-house-price ratios last year, according to data from TD real estate economists.

It's considered a key measure of affordability, and in Hamilton the average house price is now 4.7 times the average local household income. Ten years ago the average house cost 3.6 times the average income.

That growing gap points to a darker side of the city's much heralded housing boom and influx of Toronto buyers: That local residents trying to buy into the market might not be able to afford to. 

'Seriously unaffordable'

Over the past decade, incomes have stayed relatively flat while house prices have risen dramatically. A report published this week, from international economics firm Demographia, pegs Hamilton housing as a function of incomes as "seriously unaffordable" — but just slightly shy of the report's "severely unaffordable" category. Hamilton was Canada's sixth least affordable city in that report. 

Home price-to-income ratio, 1990-2014

As Hamilton's housing market continues to heat up, so does the buzz that more and more Torontonians have begun to see Hamilton as an attractive, lower-priced place to live.

A wave of condo proposals aims to take advantage of the new buying power and Hamilton's commitment to intensification rather than sprawl (Local realtors don't track how many buyers are coming from Toronto, so quantifying that influx is difficult).

But experts say Hamilton is just starting to see the impacts of neighbourhood change due to a rising housing market. And the shrinking affordability may not portend doom for the local economy.

Hamilton price-to-income ratio, 2007-2014

(CBC News)

"There is a risk in Hamilton that the house price could get beyond the reach of local incomes," said Toronto-based real estate economist Will Dunning. "I don't think it's there yet. Somebody who owns a home, they're benefiting from rising prices. It's a small minority of the housing market is in the process of buying."

Dwayne Cline has been a pastor in Hamilton's downtown Central neighbourhood for 20 years. He and his wife, Aimee, bought their two-and-a-half storey house on Murray Street for $110,000 14 years ago. 

"We bought the house we could afford," he said. "Everyone could buy a starter house in the North End before."

But he now worries that's not the case. He's pleased to see the neighbourhood attractiveness increase, but worries about other less positive effects as well.

"People see the North End as a place to move into," he said. "If you're a homeowner that's middle class that's fantastic. … But if you lived here for generations and have had more blue-collar means and have struggled making ends meet — I now know people in our neighbourhood who can't afford to live here." 

Ward 4 Councillor Sam Merulla also worries about the impact of the price boom on Hamiltonians whose salaries aren't keeping pace.

"The bad news is anyone looking at getting into the market will find it more difficult, for the exception of the vast amount of Torononians with salaries from the Toronto employment market, who are finding the market very affordable and driving the market up at the expense of the existing residents and corresponding salaries."

Dunning said he doesn't like the price-to-income measure over time, because a change in interest rates can affect how much buyers feel they can afford in monthly mortgage payments. 

Still, rising property assessments send taxes higher, which can "be a squeeze on low-income households," said Jim Dunn who directs the The Collaboratory for Research on Urban Neighbourhoods, Community Health and Housing at McMaster University. "People can become house-rich and income-poor. But we’re a long way from those scenarios."

'A half million for your house?'

The Clines got a first-hand taste of the market dynamics recently. Fourteen years and four kids later, the Clines have fixed up the attic as a bedroom, underpinned the basement and added a laundry room and bathroom to the main floor. 

But they weren't prepared for the knock at their door last summer.

"A Toronto realtor knocked on my door and said 'I have a client prepared to offer half a million dollars for your house,'" he said.

Cline was stunned, but pushed back. He didn't want to move. "I live and work in the neighbourhood," he said. But he was curious: How far would the buyer go? Cline threw out $600,000, on a lark. The buyer declined.

Still, the already lofty offer stood out. "That just emphasizes how much the house values are going up," Cline said.

That the conversation would happen to him showed how much of an impact Hamilton's housing boom is having on the neighbourhood, which was "typically been one of the poorest neighbourhoods in Hamilton, one of the poorest in the country," Cline said.

Houses that used to be rented out have been put up for sale. To describe Cline's perch in realtor terms, he now lives "minutes" from a planned new train station and new developments on the waterfront. Cline said he knows he may be in a minority of homeowners in the neighbourhood who welcomed the mix of incomes and mental stability and didn't worry about raising his kids there.

Some of the people with lower incomes who used to live nearby — many of whom he knows from work his Hughson Street Baptist Church does in the neighbourhood — have moved to Ottawa St., to Kenilworth, to Wentworth. Some of the more regular foot traffic between social services located in the neighbourhood has subsided as at least one centre has moved east. 

'We're still Hamilton'

Condos-Connaught

The planned revival of the Royal Connaught hotel as a condo project is expected to add nearly 700 condos to the downtown core. (John Rieti/CBC)

Richard Harris teaches a fourth-year real estate class at McMaster University. As a geographer, Harris said he's keenly interested to see the way the migration within the city may happen. 

"It's a little bit early for that really to be strongly apparent," he said. 

Harris said he has a hunch that tenants or would-be buyers may be priced out in the North End and James Street North, "where clearly prices are going up," he said, and moving to the east Mountain or the east end. "How much actual physical displacement in terms of residents is not clear as yet."

But, like Cline, Harris said he knows students and recent graduates who are facing the reality of a market that's not necessarily kind to first-time buyers. 

By the time one student finished school the market in the neighbourhood she wanted to buy in had risen beyond her reach, he said.

"Because house prices had been going up by Hamilton standards, it did mean that she was still a renter not an owner," he said. "She's part of the fallout of that." 

The rising market has two impacts on lower-income first-time buyers, Harris said. 

"One is inhibiting people from buying in Hamilton," he said. The other is pushing them further out. "They either remain renters in Hamilton or they say 'We bought in Brantford and commute."

The city's economic development and building divisions don't require developers build a number of their units for affordable housing, pay into a fund, or include a mix of certain-sized units. 

Cline said he hopes the city and the North End neighbourhood can find ways to stem the displacement. He said he hopes the city will maintain the same number of subsidized rental units there, even as more condos are slated to be built. 

"I don't want us to be the waterfront of Oakville. We're still Hamilton," Cline said. "We have an amazing opportunity to think through how the North End be a truly blended community." 

kelly.bennett@cbc.ca