The Affordability of Owner-Occupied Housing in the United States: Economic Perspectives
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Title: The Affordability of Owner-Occupied Housing in the United States: Economic Perspectives
There are many conceptualizations of how to measure housing affordability and there are many affordability indexes. All measures are based on judgments of which components of housing costs should be included and judgments about when these costs should be considered excessive. This study reviews existing theory and empirical work about the affordability of owner-occupied housing. It concludes that only a few affordability indexes are well grounded in economic theory, although all contain ad hoc assumptions. One commonly made judgment is that a household's housing cost should be compared with its income, although alternative comparisons such as with housing construction costs have been proposed. Another conclusion reached is that an affordability index should measure the full cost of housing faced by the homeowner.