Approaches of Measuring Housing Affordability: Retrofitting Affordability Approach from Replicability to Reality

Abstract

Unprecedented urbanization along with concern for affordable housing in developing 
countries require to rethink about the comprehensive approach of measuring affordable 
housing that fit as per their socio-economic, institutional, and legal context. However, 
developing countries are replicating the typically used ratio approach that has been 
picked from the developed English speaking nations for measuring housing affordability. 
It has been evident that contextual differences between that of English speaking countries 
and developing countries underpinning the tension of theoretical rigor versus policy 
implications along with affordable housing versus housing standard and housing induced 
poverty. Hence, this study explores the critical overview of approaches for measuring 
housing affordability from global practices. To attain the objective, this study adopts 
qualitative approach. The argument to explore the critical overview of approaches of 
measuring housing affordability have been crafted from related literature. The defining 
criteria of affordable housing in the USA, UK, Australia and developing countries have 
been reviewed. Herein, gross scenario of Dhaka city as an example of developing country 
has been considered. Finally, to explore the critical overview of different approaches of 
measuring housing affordability, emergence, significance, recommended authority, and 
major criticism has been portrayed through review of literature. Result found that the 
definition of housing affordability has been delineated from different point of views. The 
current trend of defining housing affordability not only includes the financial dimensions 
but also social and environmental dimensions. Hence, the typical method of measuring 
housing affordability may not meet the criteria of affordable housing. For instance, The 
USA, UK, Australia and developing countries define affordable housing through fixing 
benchmark of 30%, 25%, 30-40% and 30% of total household income respectively
considering financial dimension solely. There are basically two contrasting approaches of 
measuring housing affordability. One is ratio approach which may be measured as ratio 
of income and house rent, mortgage and house price and does not consider housing 
standard and other non-housing cost that determines quality of life. Another approach is 
residual income approach that eliminates criticism of ratio approach through 
incorporating the housing standard and other non-housing cost. In addition, multiple 
decision making model incorporates the environmental dimensions in housing 
affordability. In the meantime, context of Dhaka city reveals that social dimensions and 
environmental dimensions need to be incorporated in measuring housing affordability. 
Hence, more than one measure can be considered while formulating policy to achieve 
enhanced housing and transportation infrastructure, a better quality of life, improved 
housing for the poor in developing countries like Bangladesh.