Impact of accessibility on housing expenditure and affordability in Hong Kong's private rental sector

Abstract

The expenditure on rental housing as aproportion of income is usually measured by therent-to-income ratio, which is the mostcommonly used affordability indicator, whilethe residual income approach is often taken asan alternative. This paper attempts toidentify the determinants of the rent-to-incomeratio, and to examine the impact ofaccessibility on affordability in the privaterental sector. Empirical results indicate notonly determinants of the rent-to-income ratiowould vary, but even the same variable wouldhave different impacts on the rent-to-incomeratio and hence on affordability for locationswith different accessibility. Although therent-to-income ratio in Hong Kong isconsiderably higher than in most other cities,results from the residual income approachindicate that the affordability problem is notsignificant, and that it has a strong link withaccessibility.