Affordable housing

Affordable housing is housing which is deemed affordable to those with a median household income or below as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affordable housing refers to mortgages and number of forms that exist along a continuum from emergency shelters, to transitional housing, to non-market rental (also known as social or subsidized housing), to formal and informal rental, indigenous housing, and ending with affordable home ownership.

Determining housing affordability is complex and the commonly used housing-expenditure-to-income-ratio tool has been challenged. In the United States and Canada, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household's gross income. Canada, for example, switched to a 25% rule from a 20% rule in the 1950s. In the 1980s this was replaced by a 30% rule. India uses a 40% rule.

The most common approach to measure the affordability of housing has been to consider the percentage of income that a household spends on housing expenditures. Another method of studying affordability looks at the regular hourly wage of full-time workers who are paid only the minimum wage (as set by their local, regional, or national government). The hope is that full-time workers will be able to afford at least a small apartment in the area where they work. Some countries look at those living in relative poverty, which is usually defined as making less than 60% of the median household income. In their policy reports, they consider the presence or absence of housing for people making 60% of the median income.

Many U.S. studies, for example, focus primarily on the median cost of renting a two-bedroom apartment in a large apartment complex for a new tenant. These studies often lump together luxury apartments and slums, as well as desirable and undesirable neighborhoods. While this practice is known to distort the true costs, it is difficult to provide accurate information for the wide variety of situations without the report being unwieldy.

The majority of the more than seven billion people on earth now live in cities (UN). There are more than 500 city regions of more than one million inhabitants in the world. Cities become megacities become megalopolitan city regions and even "galaxies" of more than 60 million inhabitants. The Yangtze Delta-Greater Shanghai region now surpasses 80 million. Tokyo-Yokohama adjacent to Osaka-Kobe-Kyoto have a combined population of 100 million. Rapid population growth leads to increased need for affordable housing in most cities. The availability of affordable housing in proximity of mass transit and linked to job distribution has become severely imbalanced in this period of rapid regional urbanization and growing density convergence.

In some countries, the market has been unable to meet the growing demand to supply housing stock at affordable prices. Although demand for affordable housing, particularly rental housing that is affordable for low and middle income earners, has increased, the supply has not. Potential home buyers are forced to turn to the rental market, which is also under pressure. An inadequate supply of housing stock increases demand on the private and social rented sector, and in worse case scenarios, homelessness.

In both large metropolitan areas and regional towns where housing prices are high, a lack of affordable housing places local firms at a competitive disadvantage. They are placed under wage pressures as they attempt to decrease the income/housing price gap. Key workers have fewer housing choices if prices rise to non-affordable levels. Variations in affordability of housing between areas may create labour market impediments.

A household's inhabitants must decide whether to pay more for housing to keep commuting time and expense low, or to accept a long or expensive commute to obtain "better" housing. The absolute availability of housing is not generally considered in the calculation of affordable housing. In a depressed or sparsely settled rural area, for example, the predicted price of the canonical median two-bedroom apartment may be quite easily affordable even to a minimum-wage worker if only any apartments had ever been built. Some affordable housing prototypes include Nano House and Affordable Green Tiny House Project.



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