Whichever way it is assessed, the affordability of housing depends on the local housing market, labour market and welfare system – and due to widely varying opportunities in different European regions, we face very different types of affordability problems across Europe. MRI managing director József Hegedüs’ article for Friends of Europe.
Friends of Europe is a leading think tank that connects people, stimulates debate and triggers change to create a more inclusive, sustainable and forward-looking Europe.
“Although several definitions of the term exist in the research and academic communities, ‘affordable housing’ simply means that the ratio of housing cost to household income is not more than an arbitrary ceiling of 30% to 35%. This ratio is influenced by two main factors: the local housing market (including rent, mortgage interest rates and house prices), and the local labour market and the pension system (essentially, earning opportunities).
The social consequence of the affordability problem is that households either have to restructure their household budget ‒ which may result in an unacceptably low consumption of basic goods such as culture and recreation ‒ or are forced to change their housing situation and move to a lower position on the housing ladder, to overcrowded, sub-standard units, or a dwelling located far from the labour market and urban services.
Both the local labour markets and the housing markets are volatile these days, which means that there are always chances that the affordability problem becomes serious in a short time. The key question is how much various housing and labour market institutions, such as measures, schemes, and organizations, can neutralise the stress effects of the markets.”