Measures Of Housing Affordability Research Articles

Housing affordability and poverty in Europe: on the deteriorating position of market renters

Abstract There are growing concerns about housing affordability throughout Europe. Recent studies by Housing Europe and the OECD have suggested that we are witnessing a generalised deterioration in housing affordability, while other studies point to worsening housing affordability for specific groups, such as renters or low-income households. The aim of this paper is to explore trends in, and incidences and determinants of, housing affordability in a comparative European context over the period 2010 to 2018. To do this we analyse data from the EU Statistics on Income and Living Conditions survey. We examine trends across different measures of housing affordability; examine its association with a variety of socio-economic characteristics and explore country-level differences in housing affordability problems. Our study finds that despite claims of worsening housing affordability, affordability measures show little sign of generalised deterioration over the period in question but that risks of affordability problems have become more concentrated on market renters during this period. At the country level, we find that gross domestic product (GDP) per capita and the at-risk-of-poverty rate are associated with housing affordability problems both between countries as well as within countries over time, while housing allowance coverage and rent regulation stringency are associated with affordability problems between countries.

Measuring subjective housing affordability using a data-driven discrete information approach: A case study of Selangor, Malaysia

ABSTRACT A widely adopted measure of housing affordability is that households should spend no more than 30% of their household income on housing. However, this normative threshold is an arbitrary Great Depression-era guideline and may not be relevant today. This paper proposes a subjective indicator of housing affordability by introducing a method commonly used in the medical sciences. It utilizes discrete information to estimate a subjective affordability ratio that discriminates between subjective house-poor and non-house-poor households. We apply the proposed method to household-level data collected in Selangor, Malaysia, and show that the optimal cut-off point is 23.5%. This estimated value suggests a higher prevalence of house-poor households than is implied by the regularly assumed 30% threshold. In addition, we perform a sensitivity analysis and find the bias in the estimated cut-off point is close to zero.

Neighborhood-level housing affordability and maternal depression

Housing affordability is a growing public health crisis, with lower-income families disproportionately affected. At the individual-level, measures of housing affordability have been linked to maternal mental health, but less is known about how neighborhood-level characteristics influence wellbeing in the perinatal period. Using data from the Future of Families and Child Wellbeing Study, which follows a national cohort of children born between 1998 and 2000 in United States cities and their parents, we examined associations between neighborhood-level housing affordability and maternal depression in the postpartum year. Non-Hispanic Black and Hispanic mothers were overrepresented among those living in rent-burdened neighborhoods. Living in a rent-burdened neighborhood was associated with a 3-percentage-point increase in the risk of maternal depression in the postpartum year, even after adjusting for individual and other neighborhood-level covariates. Individual-level housing hardships associated with maternal depression included difficulty paying rent, staying in temporary housing, and having trouble paying utilities. Policies that address neighborhood-level affordability may have spillover benefits for lowering the risk of depression and reducing disparities in maternal mental health.

Housing affordability and mental health in the United States: 2013–2020

This study examined the relationship between housing affordability and mental health of American homeowners and renters during 2013–2020, using fractions of people spending more than 30 percent of their income on housing at the state level as an indicator for housing affordability. State-level housing affordability measures were obtained from the American Community Survey and matched with individual-level data from the Behavioral Risk Factor Surveillance System Survey. By using linear regression models and exploiting variation in housing affordability at the state level for different income groups, this study found that unaffordable housing was associated with poor mental health among renters but not among homeowners. The findings suggest that housing affordability disproportionately affects the mental health of people who rely on renting for their housing needs.

What Can District Migration Rates Tell Us about London’s Functional Urban Area?

In the early 1990s, Anthony Fielding coined the term ‘escalator region’ to describe how London and the South East attracted those with greater human capital by offering them superior career prospects and enhanced returns in the housing markets. When delineating a housing or labour market area, it is not uncommon to require high levels of migration and commuting within the market area relative to those that cross the area’s boundaries. Net migration flows to and from this escalator region change depending on the age range one examines, making migration across boundaries relatively high. It is proposed that focusing on age ranges that reflect younger adults would capture the extent of the market. In particular, the birth of a first child is likely to trigger migration, but that movement is constrained to be within the boundary of the market area. The decision to buy a dwelling would be made around the time of this event. This paper delineates market areas using spatial autocorrelation. This has the advantage of using a statistical criterion rather than a containment value. Broadly similar areas in the Greater South East are revealed using relative housing affordability measures, the movement of infants and the migration of 20- to 24-year-olds. It is argued that the time-varying patterns of migration of 30- to 39-year-olds is reflective of a change in housing affordability, forcing more households to migrate with children whilst renting.

“The Rent Eats First”: Rental Housing Unaffordability in the United States

The United States is in a housing affordability crisis, with nearly half of all renter households spending more than 30% of their incomes on rent and utilities each month. This traditional measure of housing affordability may understate the hardships renter households face because it does not consider the array of expenses households have. Whereas housing policy has relied on percentage-of-income measures to indicate whether housing is affordable, researchers over the last three decades have called for a residual income approach that uses spending estimates to calculate what a household can actually afford. This article examines the extent of the affordability crisis by comparing standard cost burden rates for working-age renter households with residual-income cost burdens. Using the Economic Policy Institute’s Family Budget Calculator and the 2018 American Community Survey, we estimate the number of renter households that do not have enough income to afford a comfortable standard of living after paying rent and utilities. We investigate several policy levers, finding that a combined policy that addresses both housing and transportation affordability would have the largest impact on reducing residual-income cost burdens.

Applications of Housing Affordability Measurement Approaches Used in Planning Affordable Housing: A Systematic Review

Housing affordability measurement is a recurring subject in planning literature. Research evidence suggests that in planning for affordable housing, planners typically apply the normative (ratio and residual income) measures to all variants of affordability stress. Hence, proffering intervention strategies that often fail to address peculiar situations in their towns. This systematic review synthesizes empirical evidence in the literature relating to various applications of housing affordability measurement approaches. To ascertain the various application fields/domains, present findings, specify relevant literature gaps, and propose future research themes. The review findings demonstrate that the accurateness of conclusions reached, about the severity of the housing affordability problem is highly dependent on the measurement approach used. The study concludes that the application of appropriate methods to specific situations leads to better planning outcomes.

Proceedings From the Conference on the Impact of Housing Affordability on Economic Development and Regional Labor Markets

Housing affordability is an important component of economic development. It affects several levers for regional growth, including business formation, through wealth building and influencing entrepreneurship. Housing affordability also affects location decisions—of both labor and employers. These proceedings document findings from research presented at a conference titled “The Impact of Housing Affordability on Economic Development and Regional Labor Markets” sponsored by the Federal Reserve Bank of Atlanta and the W.E. Upjohn Institute for Employment Research. The analysis presented at the conference suggests that higher-cost housing can trigger productive workers to leave markets and may limit the ability of workers, especially African American workers, to enter the labor market. At the same time, large economic development projects can displace workers. Research suggests that land use regulation is a driver of housing affordability; typically, higher levels of regulation lead to higher costs. Also, the efforts of economic developers affect local policies, like regulation and zoning, to attract firms. Discussion at the conference suggested housing issues be more integral to economic development policy and that new and expanded measures of housing affordability be used to track affordability.

Inflection points in community-level homeless rates

Statistical models of community-level homeless rates typically assume a linear relationship to covariates. This linear model assumption precludes the possibility of inflection points in homeless rates—thresholds in quantifiable metrics of a community that, once breached, are associated with large increases in homelessness. In this paper we identify points of structural change in the relationship between homeless rates and community-level measures of housing affordability and extreme poverty. We utilize the Ewens–Pitman attraction (EPA) distribution to develop a Bayesian nonparametric regression model in which clusters of communities with similar covariates share common patterns of variation in homeless rates. A main finding of the study is that the expected homeless rate in a community begins to quickly increase once median rental costs exceed 30% of median income, providing a statistical link between homelessness and the U.S. government’s definition of a housing cost burden. Our analysis also identifies clusters of communities that exhibit distinct geographic patterns and yields insight into the homelessness and housing affordability crisis unfolding on both coasts of the United States.

Housing affordability, borrowing constraints and tenure choice in Korea

ABSTRACT This paper analyses the linkages between housing affordability and borrowing constraints, and the impact of the latter on housing tenure decisions in Korean cities during the period 2006–2016. The conventional aggregate measures of housing affordability provide a mixed picture. The price to income ratio (PIR) increased in major cities but the home purchase affordability, or repayment affordability improved between 2006 and 2016. Also, the access to mortgage finance increased substantially thanks to the expansion of mortgage supply, low interest rates and lenient macroprudential regulations. We investigate whether and how these changes affected household home purchases using the household-level micro data from the 2006 and 2016 Korea Housing Surveys. We construct the variable indicating the degree of borrowing constraint in terms of wealth each household faces and show that the number of borrowing-constrained households dropped significantly between 2006 and 2016. We then investigate the effect of the wealth constraint by including a measure of the degree of the borrowing constraint as an explanatory variable in the tenure choice equation, together with other key variables such as the cost of owning relative to renting. Estimation results confirm that, as expected, the propensity to home purchases declines if households are judged as wealth-constrained. It was also found that the detrimental effect of the wealth constraint on home ownership increased significantly, particularly for severely constrained households, while the homeownership rates for others improved during our study period. Our findings suggest that affordability measures that do not consider borrowing constraints may not be very helpful in gauging affordability of home purchases at the household level.

Housing affordability: a framing, synthesis of research and policy, and future directions

ABSTRACT We synthesize the vast, international scholarly literature related to the growing problem of housing affordability. As a foundation for assessing both the causes of housing affordability problems and possible policies for alleviating them, we take a systematic, holistic perspective and specify nine structural relationships for a metropolitan area that comprehensively delineate the determinants of housing affordability. We discuss concepts and measures of housing affordability, evidence on the primary causes and effects of unaffordable housing, alternative policy approaches, potential future trends in affordability, and suggestions for further research. While focusing on the most recent, high-quality empirical evidence, we also rely on previously published reviews and seminal papers in order to provide historical perspective on how the literature has evolved. Our reconnaissance of the international literature since 2008 demonstrates that although evaluation research in the context of western, developed countries’ housing policies has dominated, increasingly such research has emerged from other countries. Highlights We discuss how to frame housing affordability issues, synthesize evidence from the relevant literature, and propose directions for future research. We take a holistic perspective to understand causes of housing affordability problems and assess policy responses. Our review of the international scholarly literature encompasses the evidence from non-western, developing countries. Despite the extensive literature, there remain unexplored questions and emerging topics.

A fresh look at contemporary perspectives on urban housing affordability

ABSTRACT The literature on housing affordability has grown rapidly since Hulchanski [1995, p. 489. The concept of housing affordability: six contemporary uses of the housing expenditure-to-income ratio. Housing Studies, 10(4), 471–491] declared that housing researchers should avoid using the term since it is not a robust concept and measurement often lacks validity. In the ensuing 24 years, however, scholars have continued to debate the definition and measurement of housing affordability as well as the prevalence and type of ‘housing affordability problems’ in various countries. This paper is a think piece which takes a fresh look at housing affordability as a concept which has persisted despite considerable contestation and scepticism about its use. It provides a critical and multi-disciplinary assessment of housing affordability starting with early conceptualization of the nexus between economic principles and social norms about housing and living standards to a reworking of housing affordability in the twenty-first century as an urban issue affecting lower and middle-income households in cities, as a consequence of the financialization of housing and urban restructuring. It argues that the housing affordability concept has been repurposed such that the focus is less on understanding housing expenditures in contributing to poverty and disadvantage within the domain of social policy and more on the urban policy challenges of growing inequities in access to urban resources. The paper highlights the challenges for urban policy in adopting and adapting rather than rejecting a multi-dimensional concept of housing affordability and consequently the importance of new ways of measuring urban housing affordability.

Energy Cost Burdens for Low-Income and Minority Households

Problem, research strategy, and findings: Of the three primary components of housing affordability measures—rent, transportation, and utilities—utility costs are the least understood yet are the one area where the cost burden can be reduced without household relocation. Existing data sources to estimate energy costs are limited to surveys with small samples and low spatial and temporal resolution, such as the American Housing Survey and the Residential Energy Consumption Survey. In this study, we present a new method for small-area estimates of household energy cost burdens (ECBs) that leverages actual building energy use data for approximately 13,000 multifamily properties across five U.S. cities and links energy costs to savings opportunities by analyzing 3,000 energy audit reports. We examine differentials in cost burdens across household demographic and socioeconomic characteristics and analyze spatial, regional, and building-level variations in energy use and expenditures. Our results show the average low-income household has an ECB of 7%, whereas higher income households have an average burden of 2%. Notably, even within defined income bands, minority households experience higher ECBs than non-Hispanic White households. For lower income households, low-cost energy improvements could reduce energy costs by as much as $1,500 per year.Takeaway for practice: In this study we attempt to shift the focus of energy efficiency investments to their impact on household cost burdens and overall housing affordability. Our analysis explores new and unique data generated from measurement-driven urban energy policies and shows low-income households disproportionately bear the burden of poor-quality and energy-inefficient housing. Cities can use these new data resources and methods to develop equity-based energy policies that treat energy efficiency and climate mitigation as issues of environmental justice and that apply data-driven, targeted policies to improve quality of life for the most vulnerable urban residents.

Methodological weaknesses in the measurement approaches and concept of housing affordability used in housing research: A qualitative study.

Housing affordability (HA) is considered an important determinant of a country’s socioeconomic development and stability. However, its optimal measurement has remained a major concern worldwide. In recent decades, methodological development and researches on housing affordability measurement approaches (HAMA) have accelerated and continue to grow exponentially. Despite this intensive global development, very few attempts have been made to present the theoretical bases and track the developmental trends of these approaches. Thus, this study attempts to fill this literature gap and extend prior studies by exploring several alternatives of HAMA; with a focus on their methodological weaknesses. This paper highlights three emerging novel methodologies, which complement the relative strength of the conventional approaches. Findings suggest that the main research evidence which summarizes the weaknesses in the conventional measures is; their inability to incorporate sustainability features and over reliance on economic dimension. While the complexity of emerging methodologies, though deepen the overall understanding of multiple concerns that breed HA problems. But are less transparent, more data intensive, and their computation is very demanding, with a high tendency that their complex nature could weaken their uptake by researchers. This study raises concern over the nearly sole reliance on the conventional approaches in the reformations of policy instrument, despite their overwhelming weaknesses. It reiterates the need for reconsideration and offers new insight, but not conclusive information on better ways to conceptualize and measure HA.

Energy Cost Burdens for Low-Income and Minority Households in Six U.S. Cities: Evidence from Energy Benchmarking and Audit Data

Of the three primary components of housing affordability measures - housing cost, transportation costs, and utility costs - utility expenditures are the least understood, yet the one area where the cost burden can be reduced without household relocation. Existing data sources to measure energy costs are limited to surveys with small samples and low spatial and temporal resolution, such as the American Housing Survey and the Residential Energy Consumption Survey. This paper presents a new method to estimate household energy cost burdens that leverages actual building energy use data for 13,000 multi-family properties across six U.S. cities, and links energy costs to savings opportunities based on an analysis of 3,000 energy audit reports. We examine differentials in cost burdens across household demographic and socioeconomic characteristics, and analyze spatial, regional, and building-level variations in energy use and expenditures. We find that the average low-income household has an energy cost burden of 7%, whereas higher-income households have an average burden of 2%. Notably, we find that even within defined income bands, minority households experience higher energy cost burdens than non-Hispanic White households. For lower-income households, low-cost energy improvements could reduce energy costs by as much as $1,500 per year.

Defining and measuring housing affordability using the Minimum Income Standard

There is growing concern about a crisis in housing affordability in the UK, renewing longstanding debates about what constitutes ‘affordable’ housing. The growing use of the private rented sector by low income households has also led to increased interest in understanding the impact of housing costs on living standards. This paper builds on existing work on ‘residual income’ measures of housing affordability, accepting that what households can afford to pay for housing is related to their ability to cover other costs, and so not directly proportional to income. It proposes a new approach to defining and measuring housing affordability, based on the Minimum Income Standard (MIS). The paper then uses data from the Family Resources Survey (2008/09 to 2015/16) to examine housing affordability within the rented sector across the UK, exploring the value of this measure both in revealing the scale of the ‘problem’ and assessing the likely impact of suggested interventions.

HOUSING AND TRANSPORT EXPENDITURE: AN ASSESSMENT OF LOCATION HOUSING AFFORDABILITY

In every country, the ability to own a house is vital for the housing market. During the past five years, housing prices in the urban area in Malaysia are becoming severely unaffordable. Housing affordability ensures that housing provided is affordable for every income groups, especially the low and middle income group. The measurement of housing affordability uses household income and housing cost but disregards transportation expenditure which is a substantial amount of household expenditure. Location of housing influences transportation expenditure. The research determines the Location Housing Affordability for the low and middle income group in an urban area. This study quantitatively examines Putra Height as one of the mature residential neighbourhoods in Selangor as well as due to the availability of public transit in the area. Housing affordability and transportation affordability create an integrated Location Housing Affordability Index. Data analysis utilizes the measurement of Location Housing Affordability Index. The findings showed that Location Housing Affordability Index recognizes location as influential factor to housing affordability of 179 respondents from low and middle income group. The findings also suggested that the houses in the urban area were seriously unaffordable for the low and middle income groups. The contribution of the research is the emphasis on location as a part of housing affordability measurement.

HOUSING AND TRANSPORT EXPENDITURE: AN ASSESSMENT OF LOCATION HOUSING AFFORDABILITY

In every country, the ability to own a house is vital for the housing market. During the past five years, housing prices in the urban area in Malaysia are becoming severely unaffordable. Housing affordability ensures that housing provided is affordable for every income groups, especially the low and middle income group. The measurement of housing affordability uses household income and housing cost but disregards transportation expenditure which is a substantial amount of household expenditure. Location of housing influences transportation expenditure. The research determines the Location Housing Affordability for the low and middle income group in an urban area. This study quantitatively examines Putra Height as one of the mature residential neighbourhoods in Selangor as well as due to the availability of public transit in the area. Housing affordability and transportation affordability create an integrated Location Housing Affordability Index. Data analysis utilizes the measurement of Location Housing Affordability Index. The findings showed that Location Housing Affordability Index recognizes location as influential factor to housing affordability of 179 respondents from low and middle income group. The findings also suggested that the houses in the urban area were seriously unaffordable for the low and middle income groups. The contribution of the research is the emphasis on location as a part of housing affordability measurement.

Housing affordability and inequality:A consumption-adjusted approach

We introduce a new measure of housing affordability that adjusts for normative variation in housing consumption. The new measure is computed using extensive micro-data from Israel for the 1998–2015 period. Findings suggest sharp declines in Israel quality- and consumption-adjusted affordability. Further, the new consumption-adjusted measure suggests more pronounced affordability burdens among minority and underprivileged groups. The new measure also gives rise to elevated Gini measures of housing affordability inequality. We also find that recent trending up in house prices and income in Israel is associated with more pressing consumption-adjusted affordability challenges among those already in housing distress, particularly in outlying, peripheral areas.

Rental Housing Affordability in the Southeast: Data from the Sixth District

Housing data are available for most large metropolitan regions in the Atlanta Fed's Southeast region. However, many midsized metropolitan, micropolitan, and nonmetro areas lack detailed data on rental housing affordability and housing supply needs by income level. These data are important for state and local governments, affordable housing developers, and housing advocates to inform housing policy. Therefore, the Atlanta Fed partnered with the Shimberg Center at the University of Florida to analyze census data using a methodology developed for Shimberg's periodic Rental Market Study for the state of Florida (Shimberg Center for Housing Studies, 2013, 2016). This paper covers the six states that are fully or partially in the Atlanta Fed's District: Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. {{p}} In this paper, the authors provide a regional snapshot of housing affordability and the availability of affordable rental housing units at several scales for the Atlanta Fed's District, using data from the 2015 American Community Survey (ACS). They include figures for city, metropolitan, and state areas as well as regional figures for nonmetro areas. The authors segment the data by household income using the area median income (AMI) of each respective region. They provide estimates for renter households within five major income brackets: extremely low income (0 to 30 percent AMI), very low income (30.01 to 50 percent AMI), low income (50.01 to 80 percent AMI), moderate income (80.01 to 120 percent AMI), and upper income (more than 120 percent AMI). {{p}} The authors use two measures of housing affordability: 1) the share of cost-burdened households and 2) affordable and available rental housing supply. Metrics include the percent of cost-burdened renter households (people who pay more than 30 percent of their income on housing) and extremely cost-burdened renter households (people who pay more than 50 percent of their income on housing). Metrics also include the deficit or surplus in rental units that are both available and affordable to households at each of the above area median-income brackets. These measures tend to correlate, with high percentages of cost-burdened households associated with significant deficits in affordable and available units for low- and moderate-income households.