affordable housing

Written By: Ehsan Jahandarpour

Affordable housing is housing deemed affordable to those with a median household income as rated by country, State (province), region or municipality by a recognized Housing Affordability Index. In Australia, the National Affordable Housing Summit Group developed their definition of affordable housing as housing that is, “…reasonably adequate in standard and location for lower or middle income households and does not cost so much that a household is unlikely to be able to meet other basic needs on a sustainable basis.” In the United Kingdom affordable housing includes “social rented and intermediate housing, provided to specified eligible households whose needs are not met by the market.” Most of the literature on affordable housing refers to a 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. The notion of housing affordability became widespread in the 1980s in Europe and North America. A growing body of literature found it problematic. Notably, the shift in UK housing policy away from housing need to the more market-oriented analyses of affordability was challenged by Whitehead (1991). This article discusses the principles that lie behind the concepts of need and affordability and the ways they have been defined. This article focuses on the affordability of owner-occupied and private rental housing as social housing is a specialised tenure. Housing choice is a response to an extremely complex set of economic, social, and psychological impulses. For example, some households may choose to spend more on housing because they feel they can afford to, while others may not have a choice. 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. When the monthly carrying costs of a home exceed 30–35% of household income, then the housing is considered unaffordable for that household. Determining housing affordability is complex and the commonly used housing-expenditure-to-income-ratio tool has been challenged. 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.