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hugh-pavletich

HUGH PAVLETICH

Fellow Urban Development Institute of Australia (FDIA)

Former President –
Southern Division – Property Council of New Zealand

Co author – Annual
Demographia International Housing Affordability Survey

Demographia.com


CONTACT
+64 3 343 9944
Christchurch, New Zealand



 

 

 

Definition of an Affordable Housing Market

&

Affordability Guide - Various Dwelling Types

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DEFINITION OF AN AFFORDABLE HOUSING MARKET

For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Survey Schedules for guidance).

The critically important Development Ratios for this new fringe starter housing, should be 17 - 23% serviced lot / section cost - to balance the actual housing construction.

Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector.

... so that today … different forms of dwellings should be about or below these Median Multiples to rate as ‘affordable’ … …

  1. Standard detached housing should not cost any more than 3.0 times annual household incomes of specific metros ( refer Annual Demographia Surveys ; recent Glaeser & Gyourko paper ;  Recent Reserve Bank of Australia paper ); Harvard JCHR Median Multiple Tables (accessible top left column front page this website).
  1. New fringe starter house and land packages should cost around 2.5 times … at development ratios of 20% serviced lot and the balance construction ( Definition of an affordable housing market www.PerformanceUrbanPlanning.org  ).
  1. Apartment / townhouses should be around 2.0 times ( about 70% of detached … to illustrate refer Houston Association of Realtors Monthly Report ).
  1. Fringe manufactured house (prefab) and land packages should be around 1.5 times ( refer Leaky Homes And An Architect’s Musing’s | Scoop News March 2010 published Interest Co NZ as ‘Houston: We have a housing affordability problem’