Abstract
Purpose: Although the problem of housing affordability has been widely discussed, the theoretical underpinnings of the concept have received less attention. It has become increasingly evident that more holistic insights and integrated approaches are needed to provide a platform to define affordability, in order to influence research and policy discourse.
Design/methodology/approach: Given the increasing importance of affordability within housing policy reform, this paper seeks to ‘unearth’ the most important prognosticators of affordability. The paper employs principal component analysis to determine how affordability, as a key policy tool, should be analysed. In addition, cointegration techniques, Granger causality and impulse response analysis are applied to test the movement and shocks of the key affordability indicators and two common affordability metrics.
Findings: The principal conclusions stemming from this paper demonstrate that affordability is a multifaceted policy concept influenced by financial access (purchase) costs and the repayment costs of housing services which are correlated and interchangeable, but significantly were found not to be cointegrated.
Originality/value: Understanding the nature of housing market affordability remains problem for policy makers. This paper adds to the debate and empirical understanding of the cyclic nature of affordability and how it is defined. It shows that there are intricate causal short-term relationships between the key affordability indicators. This is problematic for contemporary housing policy and the key directions in which policy must turn.
Design/methodology/approach: Given the increasing importance of affordability within housing policy reform, this paper seeks to ‘unearth’ the most important prognosticators of affordability. The paper employs principal component analysis to determine how affordability, as a key policy tool, should be analysed. In addition, cointegration techniques, Granger causality and impulse response analysis are applied to test the movement and shocks of the key affordability indicators and two common affordability metrics.
Findings: The principal conclusions stemming from this paper demonstrate that affordability is a multifaceted policy concept influenced by financial access (purchase) costs and the repayment costs of housing services which are correlated and interchangeable, but significantly were found not to be cointegrated.
Originality/value: Understanding the nature of housing market affordability remains problem for policy makers. This paper adds to the debate and empirical understanding of the cyclic nature of affordability and how it is defined. It shows that there are intricate causal short-term relationships between the key affordability indicators. This is problematic for contemporary housing policy and the key directions in which policy must turn.
Original language | English |
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Pages (from-to) | 554-579 |
Number of pages | 29 |
Journal | International Journal of Housing Markets and Analysis |
Volume | 9 |
Issue number | 4 |
Early online date | 1 Sept 2016 |
DOIs | |
Publication status | Published (in print/issue) - 3 Oct 2016 |
Keywords
- Housing affordability
- housing policy
- principal component analysis
- Johansen
- Cointegration
- Impulse response
- Granger causality
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Peadar Davis
- Belfast School of Architecture & the Be - Senior Lecturer
- Faculty Of Computing, Eng. & Built Env. - Senior Lecturer
Person: Academic
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Martin Haran
- Belfast School of Architecture & the Be - Professor of Real Estate and Urban Studies
- Faculty Of Computing, Eng. & Built Env. - Full Professor
Person: Academic
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John McCord
- School of Law - Lecturer
- Faculty of Arts, Humanities & Social Sciences - Lecturer
Person: Academic