Determinants of housing affordability in the USA

Abstract

Purpose This study aims to identify the determinants of housing affordability in an effort to inform policy. Design/methodology/approach The authors use econometric analysis to determine variables that impact housing affordability in the USA. Findings The authors find that affordability depends on a number of demographic factors as well as physical characteristics of properties, including average age of homeowner, family size and average dwelling square footage. The authors also find that vacancy rates, increase in house price and median family income also have a significant impact on housing affordability. Additionally, the authors find that households with high-cost burdens are more vulnerable to mortgage rates and property taxes than those with moderate-cost burdens. As a result, changes in economic or policy variables tend to have a disproportionate impact on high-cost-burdened households, and they are more vulnerable to economic and policy shocks. Originality/value To date, the literature has not done a systematic investigation of housing affordability using detailed census data.