Re-conceiving Affordability in the US

The past two decades have solidified the housing affordability problem in the US. The crisis began in the 1990s as the commodification of housing took root with deregulation and lower interest rates. However, even after the... [ view full abstract ]

The past two decades have solidified the housing affordability problem in the US. The crisis began in the 1990s as the commodification of housing took root with deregulation and lower interest rates. However, even after the bubble burst in 2008, housing unaffordability continued to rise. Now as housing starts have picked up again, more people are renting are also burdened and at higher income levels.

Measuring housing affordability has been a source of debate for more than 50 years (e.g., Belsky et al. 2005). Most recently, Michael Stone has challenged the use of a straight ratio standard (i.e., 30% of income) and instead has focused on “the residual income approach” to consider what different households can afford to spend on their housing after accounting for other living expenses (Stone, Burke and Rolston 2011). While this method is useful in reframing the problem to consider all aspects of need including housing, it does not necessarily help to explain why housing costs continue to rise relative to income. As a descriptive measure, it offers limited guidance for where to intervene if the goal is to reduce those housing costs to be affordable.

In this paper, I propose that we need to reconceive our thinking about housing affordability, but not in the narrow sense of tinkering with measures and thresholds. Instead, I provide a framework grounded in spatial theory that focuses the disconnect between supply and demand, providing insights into the permanent state of crisis that makes housing unaffordability the new normal in the US.

Stone, M., T. Burke, L. Rolston. 2011. The Residual Income Approach to Housing Affordability: The Theory and the Practice. Scholar Works at UMass Boston.

Belsky, E.S., Goodman, J. and Drew, R. 2005. Measuring the Nation’s Rental Housing Affordability Problems. Cambridge, MA: Joint Center for Housing Studies, Harvard University.