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Housing affordability: Proper Measurement for Informed Policy Making


  • Gennadi Kazakevitch
  • Luc Borrowman


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.

Suggested Citation

  • Gennadi Kazakevitch & Luc Borrowman, 2009. "Housing affordability: Proper Measurement for Informed Policy Making," Monash Economics Working Papers 08-09, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2009-08

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    References listed on IDEAS

    1. B. Douglas Bernheim, 2000. "How Much Should Americans Be Saving for Retirement?," American Economic Review, American Economic Association, vol. 90(2), pages 288-292, May.
    2. Edward L. Glaeser & Joseph Gyourko, "undated". "The Impact of Zoning on Housing Affordability," Zell/Lurie Center Working Papers 395, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
    3. Shelly Lundberg & Jennifer Ward-Batts, 2000. "Saving for Retirement: Household Bargaining and Household Net Worth," Working Papers 0026, University of Washington, Department of Economics.
    4. Donald R. Haurin & Susan M. Wachter & Patric H. Hendershott, 1995. "Wealth Accumulation and Housing Choices of Young Households: An Exploratory Investigation," NBER Working Papers 5070, National Bureau of Economic Research, Inc.
    5. Philippe Thalmann, 1999. "Identifying Households which Need Housing Assistance," Urban Studies, Urban Studies Journal Limited, vol. 36(11), pages 1933-1947, October.
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    More about this item


    Housing affordability measurement; income after housing costs.;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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