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Abstract
Recently housing affordability has reached the agenda in Flanders and the Netherlands, giving a good reason to present a review of the concept of affordability and different definitions. The concept of short-term affordability, which is concerned with financial access to a dwelling and is based on cash flows, is combined with the concept of long-term affordability, which is about the costs of housing consumption. The use of these concepts is illustrated for Flanders and the Netherlands. They show that each concept has its own uses and that they are not interchangeable. However, both concepts indicate that in 2005 higher-income households, and especially homeowners (with a mortgage), were relatively better off than lower-income households, particularly renters. Homeowners' higher income levels on average more than compensate for their higher expenses in comparison with tenants; they also receive higher explicit subsidization and in times of rising prices they also receive expected returns on housing.
Acknowledgements
An earlier version of this paper was presented at the Dublin ENHR-conference in 2008. The authors would like thank the participants of the Housing Finance working group for the discussion on this paper. Thanks are also due to the referees and the Editors for their helpful guidance in writing this paper.
Notes
1 The choice of Flanders instead of Belgium was made because of the availability of the dataset.
2 Residual income is about the living standard of households after paying for housing consumption. This clearly is its strength compared to the expense-to-income ratio that gives relative figures, which do not have the same meaning in terms of consumption for low and high-income households. Further advantages and disadvantages of both methods can be found in Hancock (Citation1993), Hulchanski (Citation1995) and Stone (Citation2006a).
3 To prevent the introduction of another concept, the paper will keep using the term ‘user costs’.
4 For the analyses of the results for tenants this choice is less relevant than for analyses of the results for owner-occupiers. As owner-occupiers repay their mortgage, their housing expenses will be highest at the point of acquisition, ceteris paribus.
5 The disposable income is divided by the sum of the weights for the household members in order to make it ‘equivalent’ and comparable between different household types. The first adult has a weight of 1, each additional adult in the household a weight of 0.5 and each child up to a maximum age of 15 a weight of 0.3.
6 This is the only way to discuss subsidies, as the aim of the analyses was not to determine the extent of subsidization according to some benchmark, e.g. the primary structure of the tax system (in order to determine tax expenditures) or in comparison with market rents or market imputed rents or to achieve a neutral subsidization of the different tenures (Haffner, Citation2002; Hancock & Munro, Citation1992; Hills, Citation1991; Poterba, Citation1984, Citation1992; Thalmann, Citation2007).
7 In the Netherlands the average house price almost reached €223 000 in 2005; the range covered €165 000 for apartments to €370 000 for a detached single-family dwelling (Kadaster, http://www.kadaster.nl). In Flanders the average house price of €162 400 in 2005 was lower than in the Netherlands. The price of small and middle-large dwellings reached €139 600 in 2005. The price of apartments also reached €147 500 in 2005; for large dwellings €272 300 (Stadim, Citation2006). It should be remembered that the geographical differences regarding price increases in both ‘countries’ are substantial.
