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Understanding AffordabilityThe Economics of Housing Markets$
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Geoffrey Meen and Christine Whitehead

Print publication date: 2020

Print ISBN-13: 9781529211863

Published to Policy Press Scholarship Online: January 2021

DOI: 10.1332/policypress/9781529211863.001.0001

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Is Housing Really Unaffordable?

Is Housing Really Unaffordable?

(p.17) 2 Is Housing Really Unaffordable?
Understanding Affordability

Geoffrey Meen

Christine Whitehead

Policy Press

Most UK households do not face affordability difficulties; those most affected are typically low-income renters and aspiring first-time buyers. However, popularly-used affordability indicators look at the average household position across the country, rather than the distribution across households. Therefore, Chapter 2 discusses the strengths and weaknesses of different affordability measures, including the popular price to earnings or income ratios, the share of expenditure taken by housing and residual income methods. The chapter is critical of these measures and, therefore, proposes two new indicators that provide more information: the first examines the relationship between housing stress and expenditure shares for low-income renters; the second constructs a version of the Lorenz curve for aspiring first-time buyers and shows the proportion of houses that could be afforded by households with different levels of income around the country.

Keywords:   Affordability indicators, Price to earnings ratio, Expenditure shares, Housing stress, First-time buyers

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