What's affordable? - Developing a framework and calculator for determining housing affordability
How do we define “affordable”? This question remains central to the affordable housing sector. Often a rule of 30% of household income is used to determine an affordable housing payment for a household, yet this method is fairly crude and fails to take into account the reality that lower income households often spend less, and that transport and other costs impact on funds available for housing expenses.
The danger is that if household affordability is not accurately gauged by public or private sector developers, then there is a serious risk that there will be insufficient effective demand by households to purchase or rent the houses produced, thus leading to high vacancy rates and/or the need to decrease price and thus undermine the viability of the project such that investors’ expectations are not met. Poor affordability targeting can also put pressure on government to provide further subsidy. At the same time, it is unrealistic to insist on a target price that cannot be feasibly delivered by a developer. The viability of affordable housing projects therefore depends upon accurate methods for: a) gauging household (or buyer) affordability and, b) achieving unit costs that meet those affordability constraints.
To address this persistent question, Shelter Afrique and CAHF partnered to develop a framework and calculator for better determining housing affordability. The framework considers both demand and supply side perspectives, and takes into account that local-level demographic and income data is often not available in many African countries.
To view the presentation and the full report, click on the link below. You can view and explore the online calculator, on CAHF’s website, by clicking here.Presentation Full report