Housing affordability indicators and the sustainability paradigm in OECD countries

Abstract

The present study aimed to analyse the housing affordability indicators (HAI) and sustainability paradigm (SP) of 23 Organisation for Economic Co-operation and Development (OECD) countries for the period of 2010–2019. The study used different estimators to overcome the heterogeneity and endogeneity problems of panel data and adopted many diagnostic tests to increase robustness. The findings of panel least square, generalized least square, and instrumental variables of the two-stage least squares regression approach showed that three HAI proxies - households' housing-related expenditures, housing costs, and housing market proxies - had a significant positive impact on the sustainability paradigm. In contrast, the final two HAI proxies - housing allowance and housing quality – significantly negatively impacted the sustainability paradigm. Regarding the control variables, population density had a significant positive impact on the sustainability paradigm indicators. However, GDP per capita growth had a significant negative impact on most of the sustainability paradigm indicators. The main conclusion is that decision-makers should prioritize making housing more affordable. This could be achieved by controlling rents and low-cost buildings. The OECD should explore alternative methods of support, such as providing low-interest loans or targeted assistance, to help families bear housing costs without negatively impacting their financial sustainability.