Guest editorial

Citation

Taltavull, P. (2012), "Guest editorial", International Journal of Housing Markets and Analysis, Vol. 5 No. 3. https://doi.org/10.1108/ijhma.2012.35105caa.001

Guest editorial

Article Type: Guest editorial From: International Journal of Housing Markets and Analysis, Volume 5, Issue 3

This is the second special issue on affordability in the International Journal of Housing Markets and Affordability and is devoted to global research into the analysis, approaches and main determinants of affordability. The topics covered by the six papers included in this issue focus on the challenges when measuring affordability using standard approaches, the role of public policy, as well as how broad the concept of housing affordability actually is.

The studies contained in this special issue include research into four countries: Germany, the UK, Australia and China. The papers examine affordability issues related to ownership as well as renting from a tenant’s perspective. Collectively they highlight the role of housing prices affecting affordability relative to other determinants. Three papers are very technical focused, concentrating in analysing affordability indexes and how the level of housing prices are taken into account. The other three papers are analytical and discuss issues surrounding the effect of housing policies or policy systems devoted to reduce housing problems for a specific population base and the impact on housing affordability.

Bentzien, Rottke and Zietz completed a German case study finding evidence about the relationship between the lack on affordability and the low ownership rates in the German housing market. They assembled and analysed a large data base with 3.9 millions observations of houses and asking prices as a measure of prices, then constructed several affordability indexes including residual income approach and ratios adjusted by building quality and amenities. The results suggested a low homeownership rate is directly related to a lack of affordability and is a severe problem in households depending only on one source of income.

Kuang and Li created a dynamic affordability index and estimated the limitations of housing expenditure when facing housing induced poverty. Using this model they classified 35 selected Chinese cities as either affordable or unaffordable. Including different factors of housing prices in the index which vary over time, they identified empirical determinants of affordability ratios among a range of variables. They did not find significant differences in affordability between cities.

Both papers found that high levels of housing prices have the main influences on affordability to growths. However, only the Chinese paper found that lack of income and mismatching housing prices is less relevant than the level of house prices. The German paper supported the reliance on multiple sources of income to avoid this problem.

The paper by Epley proposed a best estimation of house price appreciation which is simple, accurate and easy to analyse, rather than the repeat sales method which is widely used.

Income and housing prices are not the only reasons why affordability has decreased over the past decade in developed countries. Both the Poon and Garrat paper, and the Worthington paper focused on the responsibility of the supply market side and argued that housing supply restrictions can also contribute to an understanding into the lack of housing affordability.

Poon and Garrat supported the concept that housing supply needs to be flexible to accommodate demand pressures. Housing policy in the UK could use different tools to make this possible, such as incorporating planning methods for new housing supply and using incentives to modernise the existing stock which will both assist to improve affordability.

The Worthington paper examines the concept of the role of housing supply in public policy in order to enhance affordability among low income level Australian people. The paper supports the relevance of public policies in order to enhance affordability regulations for long term provisions, focusing the level of assistance on disadvantaged households and reducing regional housing market distortions due to tax measures.

The paper by Connie Tang analyses affordability in the housing rental market using a UK case study. The conclusions support other findings in that affordability is based on a reduced level of income in households which is still present despite using public subsidies to compensate for higher rents in some UK markets like London. That is, the relative level of affordability across different locations highlights similar problems and is independent of factors such as the level of income, housing prices and public subsidies.

This issue has enhanced the overall debate on housing affordability and raised important issues. These include reference to how supply responses have created differences in affordability amongst housing markets, the role of regulation to guarantee reasonable housing affordability ratios, how affordability problems are linked to labor market, how changes in income distribution has affected affordability in developed countries, whether there are differences at a regional level in affordability are some of the critical topics which also require further research. One underlying theme is common to all papers: the need to have a common affordability measure to better understand the scope of the problem and to allow regional as well as international comparisons.

Paloma TaltavullGuest Editor