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ABT Chapter 5 Five
ABT Chapter 5 Five
ABT Chapter 5 Five
Affordability
5.1 Definition of affordability
The research on housing affordability has become popular since the 1980s. Prior to the 1980s, there was
only limited research on housing affordability. Since then the research on affordability is increasing and
at different realm, such as academia, professionals, and government, have been devoted to explore on the
topic of affordability.
Howenstine defined housing affordability as: ‘The ability of the household to acquire decent
accommodation by the payment of a reasonable amount of its income on shelter’.
‘Affordability is concerned with securing some given standard of housing (or different standards)
at a price or rent which does not impose, in the eye of some third party (usually government) as
unreasonable burden on household incomes ’(Maclennan and William, 1990; p.9).
Despite the clarification of ‘reasonable amount’, the concept of ‘given standard of housing’ and
‘unreasonable burden’ is too vague and should be defined more precisely. Bramley gave a more
specific and precise definition to affordability. He mentioned that:
‘Household should be able to occupy housing that meets well-established (social sector) norms of
adequacy (given household type and size) at a net cost which leaves them enough income to live on
without falling below some poverty standard’ (Bramley, 1990;p.16).
Hancock attempted to incorporate the concept of opportunity cost to affordability. In his
interpretation, affordability is strongly related to opportunity, which means something needs to be
forgone in order to obtain a house.
He defined that:‘…concerned with the notion of opportunity cost of housing, and clearly this is the
essence of the concept of affordability: what has to be forgone in order to obtain housing and
whether that which is forgone is reasonable or excessive in some sense’ (Hancock, 1993; p.129)
Thalmann attempted to give a summarized definition and he simplified the affordability as the
comparison between housing expenditure and non-housing expenditure. He wrote that:‘Housing is
not affordable for a household if it excessively crowds out other expenditure’ (Thalmann, 2003).
Lau defined affordability as: ‘After paying housing costs for staying in housing unit which meets
the socially accepted norms of adequate housing standard, are unable to live on a living standard
of those social security recipients’ (Lau, 2001; p.1).
Although there are many different definitions of ‘affordability’ offered by different scholars and
consensus are still required to be further established, common elements and considerations could be
found in different definitions.
Firstly, affordability deals with the user cost of housing of an individual household.
Secondly, the household should be able to consume housing at some given lowest standard.
Thirdly, the opportunity cost of non-housing consumption is an important concern of
affordability.
Fourthly, affordability includes the concept of merit goods. Non-housing goods and services
are regarded as merit goods as many definitions state the importance to keep sufficient
amount of resource for non-housing consumption; while whether housing is regarded as
merit goods is still undergoing debate.
I. Normative approach
Normative approach refers to the limits or norms of housing affordability in terms of certain
threshold values. A list of benchmarks is set to distinguish whether a household is affordable to
housing.
There are two different types of norm set to identify the affordability.
The first is ratio measurement, which means the housing cost of a household should not exceed a
certain proportion of the household income.
The second type of normative measurement refers to residual income measurement.
Residual income measurement means housing is affordable if, after paying housing cost, it leaves
them enough income to live without falling below the poverty standard.
However, apart from that, there are in fact some non-monetary but potential factors that we
should pay attention to decide one’s income ability and hence his/her housing affordability.
The following emphasizes on the non-monetary factors affecting affordability.
Nonmonetary factors can be divided into two categories:
Household factors and
Individual factors.
Some hypotheses were set before the investigation of correlation between the variables and
affordability. These are:
1. Fewer the working adult in a household, lower the affordability
2. Higher the age, lower the affordability
3. More the health status deteriorated, lower the affordability
4. Lower the education received, lower the affordability
Affordability from architect’s perspective
Designing Affordability:
Quicker,
Smarter,
More Efficient Housing
Now examines how architects, engineers, planners, policy makers, tenants, and homeowners are crafting
innovative ways to reduce the cost of housing and increase opportunities by rethinking how we build,
maintain, and occupy structures.
Affordable housing is typically focused on ensuring that a family at a certain income can qualify for a
housing unit. Affordability is a broader concept referring to lifestyles, incomes and how housing can be
designed, constructed and managed at a lower cost.
By addressing various elements necessary for the production of housing, the studies, both local and
global, presented in this chapter endeavor to reduce project costs, whether by reimagining public housing,
leveraging land, building simply, deploying technology, rethinking home life, constructing modularly, or
building incrementally. Through these means, the projects are designing affordability.
Life cycle affordability
The designs for affordable houses need to consider affordability in all life cycle of the house and
implement in all phases of the project
Pre building phase
Building
Post building phases
Affordability can be express in production cost, the cost spent for the design and construction process
Occupancy expenses the costs for the life expenditures for a different purpose
The cost of maintenance, by innovate the building design more durable and less maintenance cost
End of life cost (cost of environment) considering the environmental degradation and its rehabilitation
costs because of our buildings side effect on the environment.
How has housing affordability been defined?
The idea of affordable housing recognizes the needs of households whose incomes are not sufficient
to allow them to access appropriate housing in the market without assistance. Thus, the term
‘affordable housing’ describes housing that assists lower income households in obtaining and paying
for appropriate housing without experiencing undue financial hardship.
A range of publicly or privately initiated forms of housing may meet this specification. In fact, in
recent years, the term ‘affordable housing’ has been used as an alternative to terms such as ‘public’,
‘social’ or ‘low cost’ housing.
This is because conceptualizing and measuring affordability is as complex as understanding the
causal factors of the housing affordability problem itself. Indeed, as the discussion of affordability
debates illustrates, many of the conceptual and measurement problems stem from contested
understandings of the problem.
For example, housing affordability can be understood as the continuing costs of a mortgage or rents
relative to income, problems of accessing affordable housing (e.g., first home ownership), not being
able to afford housing costs after meeting other expenditures, or a problem of too low an income or
too high housing prices.
Even more problematically, affordability can be experienced by household types in different ways;
that is, through the employment, transport, health, and other consumption trade-offs that have to be
made by singles, sole parents and couples with children as they adapt their circumstances to high
housing costs and/or low income.
Affordable housing is housing that is appropriate for the needs of a range of low to moderate income
households and priced so that low and moderate incomes are able to meet their other essential basic
living costs.
The problem of affordability has been a function of both strong demand and limited
supply. In general, the supply of housing has not kept up with demand. Several factors have
contributed to the strong demand for housing. They include:
• Higher average real incomes and an increase in the number of double income households;
• A decrease in the size of the average household due to later marriage, fewer children and
increased incidence of separation and divorce;
• Relatively strong population growth underpinned by higher immigration rates;
• The decline in standard home loan interest rates from the mid-1990s to early 2002 reflecting
a low inflation environment;
• Greater availability of credit, including from non-bank lenders;
• The taxation system’s incentives which have encouraged investment in second and third
properties (through negative gearing provisions and the 50 per cent capital gains tax
discount) and have benefited owner-occupiers over renters (through the capital gains and
land tax exemptions on owner-occupied housing) (Select Committee 2008, p2).