Housing affordability is a concern that knows no borders. The Global Urban Affordability Crisis is a stark reminder that this issue transcends nations. As recent data from the European Parliament reveals, around 80% of cities globally lack affordable housing options for nearly half of their residents. This predicament affects living conditions and takes a toll on mental well-being.

This research by Sunway University's Associate Professor Dr Jason Ng Wei Jian and colleagues propose a subjective indicator of housing affordability by introducing a method commonly used in the medical sciences. Applying the proposed approach to household-level data collected in Selangor, Malaysia, the optimal cut-off point was shown to be 23.5%. This estimated value suggests a higher prevalence of house-poor households than is implied by the regularly assumed 30% threshold.

Measuring housing affordability isn't a simple task. It serves as the foundation upon which policies are built. Despite the lack of a universal definition, one thing is clear – housing costs should never compromise necessities like food and healthcare. In line with this, the Housing Cost Burden (HCB) metric is a widely utilised affordability measure. It gauges the portion of household income dedicated to housing expenses. The consensus suggests housing costs should not surpass 25-30% of total revenue. This principle aligns with Malaysia's definition of affordable housing, where the price should not exceed 30% of an individual's gross income. 

The 30% benchmark originated in the 1920s in the United States. During that era, a guideline emerged – a week's wages should cover a month's rent or mortgage. This practical approach ensured that households had enough left for other necessities. This concept gradually seeped into housing assistance programs.

Given the evolving landscape, the question arises – does the century-old 30% benchmark hold relevance today? Some nations have adjusted it to suit their context. For instance, Australia introduced the 30/40 housing stress rule for low-income households. Conversely, the European Union opts for a fixed threshold of 40%. Malaysia, however, has stayed with its 30% norm. 

In the 2019 Household Expenditure Survey Report, the Department of Statistics Malaysia reported only 7.7% of households exceed the 30% housing cost threshold. However, this narrative lacks the subjective dimension. Is only 7.7% of Malaysian households struggling with housing affordability? This metric does not consider the personal perceptions of affordability, whereby families might perceive their housing as unaffordable despite meeting this benchmark. More importantly, the 30% threshold has never been based on scientific evidence and is, at best, an arbitrary value. 

Using a novel approach borrowed from the medical literature, the Youden J index, this research seeks to establish evidence-based thresholds of housing affordability for households. Based on a sample of 1,211 homes, it was found that the optimal subjective housing affordability cut-off point was 23.5%. This number is notably lower than Malaysia's established 30% threshold. This implies that a more significant number of households are grappling with affordability issues than previously acknowledged.

Housing affordability is more than just statistics; it's about personal experiences. This research sheds new light on the often-overlooked subjective dimension of housing affordability. By incorporating individual experiences and perceptions, this study paints a more accurate picture of many households' struggles. Adopting a more comprehensive and evidence-based approach to measuring housing affordability is crucial for crafting effective policies addressing this global crisis and ensuring access to decent and affordable housing for all.
 

Associate Professor Dr Jason Ng Wei Jian  
School of Mathematical Sciences
Email: @email

This article has been adapted from Jason Wei Jian Ng, Tomáš Želinský, Catherine S. Forbes & Cash Hao Looi (2023), Measuring subjective housing affordability using a data-driven discrete information approach: A case study of Selangor, Malaysia DOI: 10.1080/13504851.2023.2208833