The concept of housing affordability: Six contemporary uses of the housing expenditure‐to‐income ratio

TLDR

Housing affordability is a widely used term that summarizes the difficulty of housing in many nations, yet its precise definition remains unclear. The paper interrogates the use of affordability as a concept for analysing housing problems and defining housing need. The authors examine six North American uses of the housing expenditure‑to‑income ratio—describing expenditures, analyzing trends, setting eligibility and subsidy levels, defining housing need, predicting payment ability, and informing rental or mortgage decisions—and evaluate each for validity and reliability.

Abstract

Abstract In recent years ‘housing affordability’ has become a commonly used term for summarising the nature of the housing difficulty in many nations. But what is the ‘housing affordability’ problem? This paper questions ‘affordability’ as a concept for analysing housing problems and as a definition of housing need. With a focus on the North American usage, this paper identifies six distinct ways in which the housing expenditure‐to‐income ratio is being used as an assumed measure of affordability: (1) description of household expenditures; (2) analysis of trends; (3) administration of public housing by defining eligibility criteria and subsidy levels; (4) definition of housing need for public policy purposes; (5) prediction of the ability of a household to pay the rent or the mortgage; and (6) as part of the selection criteria in the decision to rent or provide a mortgage. Each of the six uses is assessed based on the extent to which it is a valid and reliable measure of what it purports to measure.