Housing affordability is among the one of important issues discussed by housing researchers and policy makers. Price to Income Ratio (PIR) is an index in literatures that has mostly used to measure the 'pressure' of housing price to household income. However, the application of the PER index is rough and is limited in deep insight to the detail of affordability. Gan (2009) provide a concept of estimating housing affordable limit (AL) and compute the risk probability of housing affordability of individual household. In this study, the housing affordable price for a given household income is empirically estimated based on the assumptions of rate of living expenses and mortgage parameters. The estimated price of affordable limit is then used to compare to the real price for the current housing unit to calculate the price gap. By assuming the probability density function (pdf) of housing prices to be following with any given specific probability distribution, Normal Distribution for instance, the risk probability of housing affordability can be then computed. We adopted empirical data of Taipei city and Kaohsiung city in 2008, and computed the affordable risk for households by different income strata. Our empirical results show that household in the lowest-income level has the most high the risk probability of housing affordability in both cities. However, in Taipei city, household in the highest-income level also has high risk probability. That implies some rich people in Taipei risk themselves by purchasing a housing unit with too high prices.
