How Expensive Is Appropriate Housing?

Philippe Thalmann

Swiss Journal of Economics and Statistics (SJES), 1993, vol. 129, issue I, 23-38

Abstract: The conventional housing affordability index compares rents paid to incomes. It is a noisy statistic both for the general cost of housing and for the cost of appropriate housing for individual households. Noise comes from rent differentials between comparable units that are due to rent-control and non-profit landlords. It comes also from some households' choice of non-standard housing conditions. This paper estimates the market cost of appropriate housing and compares it to incomes. It shows that the conventional index does a fair job at estimating the average cost of housing. But, it misidentifies the households at risk on the housing market.

Date: 1993
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