A ratio or budget benchmark for comparing affordability across countries?

Abstract

In this article, the methodological strengths and weaknesses of two common housing affordability indicators—the expenditure-to-income ratio and the residual income—are discussed, using data for the Belgian region of Flanders and the Netherlands. Affordability standards are used in order to distinguish the group facing affordability problems. In case of residual income, we use minimum budget standards—excluding housing—that allow for decent participation in society. For the expenditure-to-income ratio, we apply the internationally frequently used 30 % benchmark. Our comparison of the two methods results in a preference for the budget approach. Consequently, we explore the possibilities of applying the budget approach in a comparative context. We conclude by making recommendations for future research.