Recent concerns over housing affordability have reflected rising house prices. The Australian Bureau of Statistics (2002) reported that over the three years from July 1998 to June 2001 the weighted average price of existing dwellings in Australia’s capital cities rose by almost 8 per cent per year. While these increases reflect general prosperity in Australia, this prosperity has not been evenly distributed over the population. Rising house prices can lower the affordability of housing to those families who are at the lower end of the income distribution. What, however, is actually meant by housing affordability? How do we judge if low-income families are facing an affordability problem for housing? If there is an affordability problem, is this due to a rise in housing prices relative to other goods and services or a fall in the relative income of the poorest in society? It is well accepted in Australia that governments should take an active stance in alleviating poverty and the hardships faced by low-income families. But an antipoverty program is different from a housing policy and the linkage between the two may be very weak if an apparent fall in housing affordability for the poor actually reflects a reduction in real income for the poor rather than a rise in the relative price of housing.

More….