Affordability, poverty and housing need: triangulating measures and standards

Over the last 25 years, 'affordability' has become a more important issue in housing policy, although it is still not fully enshrined in agreed standards, partly due to different views about how it should be measured and at what thresholds. This paper argues that subjective evidence of payment problems and material hardship can be used to validate ratio measures and points to the best thresholds to use. Using household panel survey evidence it is shown that traditional affordability ratios are still probably the best objective measure, with residual income ratios in a supporting role; and that relatively generous thresholds are better. Composites with subjective payment problems are well validated by independent evidence on material hardship, and are associated with higher incidence of moves and other housing needs. These problems are much more prevalent in private renting, with less variation between regions than household types. Multivariate models shows strong effects from income and prices interacted with interest rates, especially for owners, with significant labour market and demographic effects, and substantial effects for renters from the supply of social lettings.