The Central Statistical Office of Hungary just made accessible on its website the edited publication of researchers’ analyses of the data collected on CSO’s 2015 national representative housing survey. The first chapter of the publication, by MRI staff members József Hegedüs and Eszter Somogyi, address the links between social inequalities and the affordability of housing – a question often treated in the international literature, and also drawing increasing interest in Hungary in recent years.
When discussing the affordability of housing on the macro level, analysers often use the household income to housing costs ratio, where the socially acceptable percentage is usually set in a way that reflects local or national characteristics, such as median household income or the price level of other basic goods. In this approach a household is considered “housing poor” if their housing related spending surpasses this threshold, usually set somewhere between 20 and 40 percent. However, while useful for comparative analysis, this approach is somewhat oversimplifying. Higher income households do not necessarily face severe financial distress if their housing expenditure surpasses the income-to-expenditure threshold. Low relative housing costs in a low income household, on the other hand, may still hide serious deprivation, such as substandard housing or limited access to utilities. Accordingly, this approach is often employed in a refined manner, e.g. the “stress testing” of the Australian Bureau of Statistics only examines the cost-to-income ratio of the two lower income quintiles.
Housing affordability is a complex question, with implications overlapping multiple fields and disciplines. Aside from income and housing related costs, one also has to consider the quality of housing – see the example of the low income household’s relatively low spending while living in substandard housing above. Moreover, if the household’s remaining income is insufficient for maintaining a generally socially acceptable standard of living, the household members’ social integration could be compromised.
The researchers therefore analyse the question of affordability for different income groups, but also considering factors such as housing and settlement type, as well as socio-demographic characteristics and social status. As a result, they differentiate three varieties of housing poverty:
- In “Group A”, the cost-to-income ratio does not reach the critical threshold, but remaining income after housing costs leaves household members below the poverty line (60 percent of national median income); the household therefore cannot maintain a socially acceptable living standard.
- Group B includes the low income-low cost households: in their case the percentage of housing costs does not reach the threshold, but they live in substandard housing (housing cost is poor because of the low value, barely habitable dwelling, or the lack of utilities).
- In Group C, the cost-to-income ratio surpasses the affordability threshold. (In this case all housing related costs are considered, such as mortgage payment.)
Based on national housing survey data, Hegedüs and Somogyi has found group B to be the largest within households facing affordability problems; however, 25 percent of housing poor households face a combination of two different affordability challenges; and 6 percent of them has all three.
The analysis is currently available in Hungarian on the website of the Central Statistical Office.