Which Housing Affordability Measure is Suited for Korean Socioeconomic Situation?

Abstract

Housing affordability study, in general, has two kinds of purposes. One is for giving the information on a capacity of purchasing the house people want and monthly payment ability of housing loan. The other is for identifying the proper level of rent for low-income bracket in order to set uprental subsidy standard and amount. Five housing affordability measures either used or studied in the United States are shown in order to review the possibility of introduction to Korea. Many Housing researchers have described the problem of percent-of-income measure as a conventional housing affordability measure regardless of the convenience of usage. Market basket measure, quality-based measure, shelter poverty measure, and rental budget share are introduced as alternative measures. Market basket measure is worth consideration of introducing to Korea since it is well suited for the current socioeconomic situation in Korea and it is an improved measure compared to percent-of-income measure. The author contends that the introduction of the market basket measure should be first discussed because the strength of the market basket measure surpasses its weakness when considering Korean situation.