Housing Affordability: Proper Measurement for Informed Policy Making

24 Pages Posted: 8 Oct 2009

Date Written: October 7, 2009

Abstract

The broadly accepted housing affordability indicator is calculated as the housing cost-to-income ratio. But this only takes into consideration two averaged variables: household housing costs and household income, both of which are ambiguous and misleading as an across-the-board average. An alternative system of housing affordability measurement is suggested in this paper based on disposable income left after accounting for housing expenses. In contrary to the broadly used conventional indicator, the proposed measurement takes into account different income groups, ages and types of households as well as the level of housing consumption. This indicator, combined with the "after housing poverty line" allows for the singling out of groups of households most in need of housing help, and therefore develop more informed housing polices. Based on the proposed system of measurement, an extensive empirical work is presented using the series of the ABS Income and Housing Surveys. The results demonstrate, from a new angle, the dynamics of housing affordability in Australia during the recent decade which leads to policy implications different to polices currently in use.

Keywords: Housing affordability measurement, income after housing costs

JEL Classification: H20, H12, R31, R38

Suggested Citation

Kazakevitch, Gennadi and Borrowman, Luc, Housing Affordability: Proper Measurement for Informed Policy Making (October 7, 2009). Australian Conference of Economists 2009 Paper. Available at SSRN: https://ssrn.com/abstract=1485166 or http://dx.doi.org/10.2139/ssrn.1485166

Gennadi Kazakevitch (Contact Author)

Department of Economics ( email )

Department of Economics
Monash Univeridty
Melbourne, Victoria 3806
Australia
+ 61 3 99047135 (Phone)

HOME PAGE: http://www.buseco.monash.edu.au/about/staff/kazakevitch-gennadi.html

Luc Borrowman

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

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