What is really meant by “housing affordability”?

The last few years has seen an ass-load of media coverage about the housing affordability crisis in Auckland. The median price of a house in Auckland is now 7 times the median salary of an Aucklander, compared with 5 times in 1998… And quite frankly, the thought of saving enough money to place a deposit on a decent house* in a decent location** and to service the mortgage for three decades afterwards*** terrifies me.

For this post I want to focus on one aspect of the housing affordability debate that never seems to get much coverage: What exactly is an affordable house?

The most common measure is that affordable housing should cost no more than 30% of household income.† However, I’ve seen different sources report this as either pre-tax or post-tax household income, and in some cases the cost of power and water are included while others refer only to the cost of rent or mortgage payments. Often, none of these variables are mentioned at all. Depending which combination of criteria are used, my current housing costs are between 25% or 40% of my income (for rent only as a proportion of gross income, or rent plus utility bills as a percent of net income, respectively), so clearly defining the criteria of housing costs and household income makes a significant difference to the proportion of people who have access to affordable housing.

Furthermore, why is the percentage of household income used as the affordability threshold in the first place? Let’s say household A earns $50,000 per year, while household B earns $150,000, and both spend 30% of their income on housing costs. Household A has $35,000 leftover for all other living costs, while household B is left with $105,000, i.e. three times as much as household A. That $70,000 difference will make a huge difference in the overall lifestyle and living standards of the two families. It seems to me that overall living costs, and the availability of a living wage, are more important considerations for assessing affordability than the proportion of income taken up by  any one living cost in isolation (e.g. housing, food, or travel).

In my next post on housing affordability, I’ll discuss the different ways that housing costs can be measured, which are cause for debate about whether housing in Auckland is actually less affordable than it was a generation ago.


* i.e., not falling apart
** i.e., where most of my transport needs can be met without using a car
*** i.e., most of the remainder of my working life
† Although it’s worth noting that in the first half of the 20th century affordable housing was considered to cost no more than 20% of household income


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