How (Un)affordable is housing in developing Asia?

Abstract

ABSTRACT While housing affordability is well documented for developed countries, we still lack systematic analyses and cross-city comparisons for developing countries. This paper aims to contribute to the relevant literature by comparatively analyzing city-level housing unaffordability of 211 cities in 27 developing countries located in the Asia-Pacific region. The average price-to-income ratio (PIR) for our sample is above 12.5, which indicates that housing is severely unaffordable for the large majority of urban dwellers in developing Asia. Using a regression-based approach, we find evidence that the housing unaffordability tends to increase for cities with larger population and lower household income. Our results also demonstrate that the extent of housing unaffordability in developing Asia is substantially higher compared with cities in developed countries. Potential reasons include slower supply responses, lower household income spent on housing, relatively higher construction costs, rigid land use regulations and inefficient planning systems. If housing remains out of reach for in-migrants and newly formed households in most existing urban areas of developing countries, their potential of further urbanization and economic growth is likely to be undermined. Highlights We study housing affordability in 211 cities in 27 developing countries in the Asia-Pacific region. The average price-to-income ratio is above 12.5, indicating that housing is severely unaffordable for the large majority of urban dwellers. Housing unaffordability tends to increase for cities with larger population and lower household income. The extent of housing unaffordability in developing Asia is substantially higher compared with cities in developed countries. Potential reasons for housing unaffordability include slower supply responses, lower household income spent on housing, relatively higher construction costs, rigid land use regulations and inefficient planning systems.