This site uses cookies to deliver website functionality and analytics. If you would like to know more about the types of cookies we serve and how to change your cookie settings, please read our Cookie Notice. By clicking the "I accept" button, you consent to the use of these cookies. The unprecedented rate of urbanization across the world has led to increased demand for good, affordable housing.
Affordability is not just about the ability to buy or rent a home, but also about being able to afford to live in it. This definition of affordability goes beyond meeting expenses related to operations and maintenance, taking into consideration transport, infrastructure and services. If a home is economical enough to buy and maintain but located too far from work or school, it cannot be said to be affordable.
The factors contributing to a lack of affordability vary from city-to-city, but broadly include housing costs rising faster than incomes, the supply of houses not keeping up with demand, scarcity of land, and demographic changes such as population growth, ageing and shifts in household composition. It provides a comprehensive overview of affordable housing challenges across the housing value chain.
The report identifies factors that affect housing affordability beyond the direct costs of purchase and maintenance — including location, housing type, access to social infrastructure, the legal and regulatory environment and the state of financial markets. The report recommends a systematic approach to addressing the affordable housing crisis, while highlighting how a range of cities are finding solutions. Here are ten ways that cities around the world are addressing the housing challenge:.
In China, local governments have limited authority to expropriate rural land for new housing. The state government of New South Wales , Australia, is partnering with the private sector and non-governmental and community housing groups to develop or renovate 23, social housing units in neighborhoods that need renewal, along with affordable- and 40, private dwellings. Proceeds are re-invested in social housing, community facilities and public space.
Housing assistance is linked to participation in education, training or local employment. This is typically quicker and cheaper than new construction, as it involves only adding small kitchens to the motel rooms.
Sharing risks and benefits aligns the interests of these stakeholders and can streamline infrastructure development, planning and land-use regulations.
Shortages in construction skills can drive up labour costs and, in turn, housing construction costs. Overall, the fraction of high-income families in superstar cities is 43 percent higher than in average cities, and those cities' share of poor families is 11 percent lower.
Recent movers into superstar cities are more likely to have high incomes and less likely to be poor, than recent movers into other cities.
The higher share of rich and lower share of poor also holds true for superstar places, that is, desirable towns with a relatively fixed housing stock within a metropolitan area. With more relatively wealthy people bidding on a limited housing stock, the price of entry-level houses, and the price-to-rent ratio, accelerates when cities fill up and approach superstar status.
Entry-level prices and the price-to-rent ratio also increase at higher rates when the number of high-income families increases nationally. In short, residence in superstar cities and towns has become a luxury good. The cities' increases in housing price appear to outstrip known productivity increases and the value of any additional amenities.
The authors note that the evolution of superstar cities has important implications for the future of urban areas. For example, it raises the question of whether a metropolitan area that becomes affordable only to the wealthy can maintain its cultural or economic vibrancy. It also raises the question of what optimal public policy should be - and whether it should lead to an outcome where lower income workers cannot afford to live in superstar markets.
For example, existing superstar cities and towns could moderate their housing costs by allowing increased density, but have chosen not to. NBER periodicals and newsletters are not copyrighted and may be reproduced freely with appropriate attribution. By making it easier to build apartments, triplexes and other forms of multifamily housing, they hope to create a more diverse housing stock that will be affordable to more people. Academic research broadly affirms their argument.
But ensuring additional supply is not a simple feat. Upzoning does not necessarily mean that more units will be built. In , Minneapolis enacted a law that eliminated single-family zoning and allowed triplexes in any area formerly zoned in that fashion.
But by September , only three such units had been created , as other kinds of building restrictions and financing limitations have prevented developers from pursuing such projects. Instead, land values increased and speculators swooped in, creating negative effects for neighbourhood residents. Neighbourhood activists and historic preservationists often argue that adding new homes will disrupt existing communities, change their character and undermine what residents find valuable there.
Some renters and anti-gentrification advocates additionally fear that new construction brings pricier homes, exacerbating price pressures and affordability issues by attracting more high-income residents. The case for housing subsidies and public housing There is broad agreement that public subsidies are required to address the affordability challenges facing the lowest-income people.
In the United States, with its threadbare safety net, roughly three quarters of those who are eligible to receive assistance with their housing costs do not get help from the government. Conservative governments in the US and the UK undercut their postwar public housing programs in the late 20th century, eliminating the supply of new government-owned units.
Those efforts have been critiqued for not providing enough support to the poorest and for directing some money to private actors. The perils of too much local control In many English-language nations, local officials have a great level of authority over planning and development decisions.
In the United Kingdom, for example, while local officials have relatively little authority overall, they have immense power over real-estate development. Landowners and developers pitch projects on a case-by-case basis, where both planners and politicians are given veto power. In some cases, however, when constituents and their elected officials do not want neighbourhood change or new construction, they can make their rules too strict to allow new development a practice known as exclusionary zoning.
On the other hand, some wealthy nations have handled the housing challenge better than others, with alternative planning institutions and a healthy supply of new homes that have kept housing costs from raging out of control.
In Singapore, the authoritarian government controls much of the housing production on the limited available land. A central development agency builds new homes, usually in soaring towers, and then sells them to residents at an affordable rate and with a year lease. The government then retains control of the land itself, and at the end of the lease, the building goes back to public ownership.
It can then be redeveloped as a larger building to ensure that housing capacity grows over time. A more germane example may be Japan, which has institutional and political norms more comparable to other wealthy democracies. Its zoning laws are set at the national level and then applied by local governments. That eliminates the patchwork of confusing codes that help make building in many English-speaking nations so challenging.
Japanese zoning laws are also much less restrictive, allowing residential and neighbourhood-scale commercial construction almost anywhere except in industrial areas.
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