Modelling housing affordability measurement through the incorporation of life cycle costs
by Peter Smith
International Journal of Project Organisation and Management (IJPOM), Vol. 5, No. 1/2, 2013

Abstract: This paper examines the problems associated with home ownership affordability measurement and proposes a unique model that consumers can use to carry out an independent and comprehensive financial analysis of home ownership life cycle costs and the affordability of these costs for their specific circumstances. It commences with an overview of current measures of housing affordability leading to the identification of key methodological problems with these measures. The paper then describes the development of a conceptual affordability measurement model to address the gaps found in the literature research. The model is based on a 'residual income' approach that includes a comprehensive assessment of total potential housing life cycle costs in relation to actual purchaser income. It focuses on creating greater consumer awareness of the total costs of ownership and concomitant financial risks. Risk simulations for different ownership scenarios are a feature of the model. Although focused on the Australian scene, the conceptual aspects of the model have universal application.

Online publication date: Fri, 31-Jan-2014

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