The Quasi-normative Approach to Housing Affordability: The Case of the Czech Republic

Abstract

The article attempts to contribute to the discussion on housing affordability and the use of affordability measures for normative purposes. The approach applied in this article is based on the estimation of economic quasi-norms on rent levels in rent-controlled (social) housing by looking at total public costs at different rent levels. The quasi-norms determining rents could be used for estimation of quasi-norms determining 'optimal' housing affordability ratios. As quasi-norms are set according to an econometric simulation output, they are less subjective than the usual normative decisions of policy-makers. This approach may have a significant relevance for some transitional countries and therefore the Czech Republic is used as a case study. The results show that there is a relatively large scope for further increases in rents in the Czech rent-controlled housing sector and scientific research can be thus employed to inform rent-setting and, via that, 'optimal' levels of housing affordability.