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

TLDR: This paper identified six distinct ways in which the housing expenditure-to-income ratio is being used as an assumed measure of affordability: description of household expenditures; analysis of trends; administration of public housing by defining eligibility criteria and subsidy levels; definition of housing need for public policy purposes; prediction of the ability of a household to pay the rent or the mortgage; and as part of the selection criteria in the decision to rent or provide a mortgage.

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.