A new measure of renter housing affordability in Germany

I define a local measure of renter housing affordability in Germany as the affordable proportion of advertised dwellings at the market along the distribution of net incomes. Local net income distributions are estimated by constructing counterfactual distributions from local income tax statistics and survey data on net incomes. A housing budget is allocated by combining the residual income and income ratio approaches from the affordability literature and based on the legal and institutional setting in Germany: in German law minimum income standards can be derived from deductibles in support obligations of parents and renters are required to earn three times the monthly rent, i.e. a ratio. I compute the affordability measure for 400 districts in 2013 and 2021 and aggregated measures for different types of regions. Affordability in Germany declined for middle income renter households, but only in regions with population growth. Lower income households with children have close to zero affordability.