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Measuring the Affordability of Home-ownership

Author

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  • Steven C. Bourassa

    (Department of Property, University of Auckland, Private Bag 92019, Auckland, New Zealand, s.bourassa@auckland.ac.nz.)

Abstract

Typical measures of the affordability of home-ownership are based on aggregate data that ignore the distribution of incomes and wealth and the range of house prices. An analysis of household survey data provides a means for overcoming those problems; however, numerous conceptual and methodological issues are involved in the use of survey data to measure affordability. This paper builds on previous analyses of those issues by Grigsby and Rosenburg and others and proposes a borrowing constraint method. That method is applied to household survey data from 1989/90 for Sydney and Melbourne, Australia. The paper simulates hypothetical changes in minimum deposit requirements and interest rates. Among its other findings, the paper concludes that, under any of the scenarios considered, only small percentages of renting households would have been able to afford home-ownership without putting themselves into poverty.

Suggested Citation

  • Steven C. Bourassa, 1996. "Measuring the Affordability of Home-ownership," Urban Studies, Urban Studies Journal Limited, vol. 33(10), pages 1867-1877, December.
    • Handle: RePEc:sae:urbstu:v:33:y:1996:i:10:p:1867-1877
    DOI: 10.1080/0042098966420
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    References listed on IDEAS

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    1. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402, December.
    2. David Johnson, 1987. "The Calculation and Use of Poverty Lines in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 20(4), pages 45-55, December.
    3. Bourassa, Steven C. & Hendershott, Patric H., 1992. "Changes in the relative incentives to invest in housing: Australia, Sweden, and the United States," Journal of Housing Economics, Elsevier, vol. 2(1), pages 60-83, March.
    4. Steven C. Bourassa & Donald R. Haurin & R. Jean Haurin & Patric H. Hendershott, 1994. "Independent Living and Home Ownership: An Analysis of Australian Youth," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(3), pages 29-44, July.
    5. Christopher J. Mayer & Katerina V. Simons, 1994. "Reverse Mortgages and the Liquidity of Housing Wealth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(2), pages 235-255, June.
    6. Steven C. Bourassa, 1995. "The Impacts of Borrowing Constraints on Home-ownership in Australia," Urban Studies, Urban Studies Journal Limited, vol. 32(7), pages 1163-1173, August.
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    Cited by:

    1. Zan Yang & Songtao Wang, 2011. "The impact of privatization of public housing on housing affordability in Beijing: An assessment using household survey data," Local Economy, London South Bank University, vol. 26(5), pages 384-400, August.
    2. Heindl, Peter & Schuessler, Rudolf, 2015. "Dynamic properties of energy affordability measures," Energy Policy, Elsevier, vol. 86(C), pages 123-132.
    3. Nor Suzylah Sohaimi & Alias Abdullah & Syafiee Shuid, 2017. "Housing Affordability and Pathways among Malaysian Young Professionals in Greater Kuala Lumpur," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(2), pages 653-665, February.
    4. Alberto Montagnoli & Jun Nagaysu, 2013. "An investigation of housing affordability in the UK regions," Working Papers 1316, University of Strathclyde Business School, Department of Economics.
    5. Xing Feng & Haiting Chen & Zhanhua Jia & Zhenxing Tian, 2023. "A Four-Dimensional Decomposition of Relative Poverty in China from the Perspective of Heterogeneity," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(3), pages 795-816, October.
    6. Madsen, Jakob B., 2012. "A behavioral model of house prices," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 21-38.
    7. JÓzsef Hegedüs & Natalia Rogozhina & Eszter Somogyi & Raymond Struyk & Andrey Tumanov, 2004. "Potential Effects Of Subsidy Programmes On Housing Affordability: The Cases Of Budapest And Moscow," European Journal of Housing Policy, Taylor and Francis Journals, vol. 4(2), pages 151-184.
    8. Steven C. Bourassa & Donald R. Haurin, 2017. "A Dynamic Housing Affordability Index," International Real Estate Review, Global Social Science Institute, vol. 20(3), pages 251-286.
    9. Uloma Jiburum & Maxwell Umunna Nwachukwu & Harold Chike Mba & Celestine Nnaji Okonkwo & Donald Chiuba Okeke, 2021. "Determinants of Public Housing Affordability for Large Income Diversity Groups in a New-Town Capital City: A Case Study of Abuja, Nigeria," SAGE Open, , vol. 11(3), pages 21582440211, September.
    10. Peter Neuteboom & Dirk Brounen, 2011. "Assessing the Accessibility of the Homeownership Market," Urban Studies, Urban Studies Journal Limited, vol. 48(11), pages 2231-2248, August.
    11. Jakob B Madsen, 2011. "A Repayment Model of House Prices," Monash Economics Working Papers 09-11, Monash University, Department of Economics.
    12. Andrea Kunnert, 2016. "Housing Affordability in Austria by Age and Year of Move-in. Application of the Residual Income and Tailored Ratio Approach," WIFO Working Papers 521, WIFO.
    13. Cecilia Enström Öst, 2012. "Parental Wealth and First-time Homeownership: A Cohort Study of Family Background and Young Adults’ Housing Situation in Sweden," Urban Studies, Urban Studies Journal Limited, vol. 49(10), pages 2137-2152, August.
    14. Tsai, I-Chun, 2019. "Relationships among regional housing markets: Evidence on adjustments of housing burden," Economic Modelling, Elsevier, vol. 78(C), pages 309-318.
    15. Chen, Xi, 2018. "Optimal life cycle mortgage and portfolio choices in the presence of the affordability constraint," Journal of Housing Economics, Elsevier, vol. 39(C), pages 1-16.
    16. Andrea Kunnert, 2016. "Leistbarkeit von Wohnen in Österreich. Operationalisierung und demographische Komponenten," WIFO Studies, WIFO, number 58932, April.
    17. Quan Gan & Robert J. Hill, 2008. "A New Perspective on the Relationship Between House Prices and Income," Discussion Papers 2008-13, School of Economics, The University of New South Wales.

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