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Affordable Housing: Concepts and Policies

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  • Peter Abelson

Abstract

This article discusses the concepts of housing affordability and policies for increasing housing affordability. Most current measures of housing affordability used in Australia are based on the acquisition costs of housing. They define housing costs in nominal rather than in real terms and include mortgage repayments that are properly regarded as savings. Moreover, they do not account for household choice over type of house or household composition. The first part of this article proposes that measures of housing affordability should be based on real housing user costs or rents. Turning to policy issues, this article argues that housing affordability is essentially a household income problem made worse by government restrictions on housing supply. High housing costs do not reflect housing market failures. To reduce housing costs, the government should allow more housing in established and Greenfield areas. The government may also improve housing affordability by subsidising housing for low‐income households. However, subsidies to urban infrastructure nearly always raise the price of land rather than reduce the price of housing. Also, the Australian government’s proposed national housing and rental affordability funds are poorly defined and likely to be ineffective.

Suggested Citation

  • Peter Abelson, 2009. "Affordable Housing: Concepts and Policies," Economic Papers, The Economic Society of Australia, vol. 28(1), pages 27-38, March.
    • Handle: RePEc:bla:econpa:v:28:y:2009:i:1:p:27-38
    DOI: 10.1111/j.1759-3441.2009.00001.x
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    References listed on IDEAS

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    1. Nathalie Girouard & Mike Kennedy & Paul van den Noord & Christophe André, 2006. "Recent House Price Developments: The Role of Fundamentals," OECD Economics Department Working Papers 475, OECD Publishing.
    2. Gary N. Marks & Stephen T. Sedgwick, 2008. "Is There a Housing Crisis? The Incidence and Persistence of Housing Stress 2001-2006," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 41(2), pages 215-221, June.
    3. Peter Abelson, 1994. "House Prices, Costs And Policies: An Overview," Economic Papers, The Economic Society of Australia, vol. 13(1), pages 76-96, March.
    4. Judith Yates, 2008. "Australia's Housing Affordability Crisis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 41(2), pages 200-214, June.
    5. Peter Abelson & Roselyn Joyeux, 2007. "Price And Efficiency Effects Of Taxes And Subsidies For Australian Housing," Economic Papers, The Economic Society of Australia, vol. 26(2), pages 147-169, June.
    6. Edward Ludwig Glaeser & Joseph Gyourko, 2003. "The impact of building restrictions on housing affordability," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 21-39.
    7. Peter Abelson & Roselyne Joyeux & George Milunovich & Demi Chung, 2005. "Explaining House Prices in Australia: 1970–2003," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages 96-103, August.
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    Cited by:

    1. Ikenna Stephen Ezennia & Sebnem Onal Hoskara, 2019. "Methodological weaknesses in the measurement approaches and concept of housing affordability used in housing research: A qualitative study," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-27, August.
    2. Kwok-Chiu Lam, 2016. "The Responsiveness of Hong Kong Private Residential Housing Prices," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 26-36.
    3. David Mazáček, 2023. "Concepts of Housing Affordability Measurements," FFA Working Papers 5.008, Prague University of Economics and Business, revised 13 Sep 2023.
    4. Jia You & Hao Wu & Sun Sheng Han, 2011. "What is affordable housing in China? Evidence from Nanjing, China," ERES eres2011_219, European Real Estate Society (ERES).

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