Affordable Housing The Case of Solomon Islands 2019
Affordable Housing: The Case of Solomon Islands 2019 South Pacific Central Banking Research Conference and Regional Policy Dialogue Warwick Resort, Port Vila, Vanuatu | 13 -14 November 2019 Angeline Bata’anisia, Jack Boe, Joan Toben, Prince Acheampong
Significance of this research • Affordable housing is a basic human need • But what really does “affordable” housing mean? • How well do we really understand the concept? In SI? • Thus, this research: how to measure the concept in the case of SI • What would the policy implications be?
Context of the study • Housing sector • National: Rental price range • 2010: $1, 200 - $10, 000 (Median price: $2, 200) • 2019: $2, 329 - $10, 000 (Median price: $3, 450) • Formal Employment: increased by 4% on average from 2010 -2018 • Headline inflation increased on average by 4. 9% from 2010 -2013 and declined to average of 1. 8% from 2014 -2018. • Economic growth • 2010 – 2015: higher growth period, average growth of 4. 1% • 2016 – 2018: average growth of 3. 5%
Literature review • Concept of Housing “Affordability” • Numerous unrelated issues: distribution of housing prices, distribution of housing quality, the distribution of income, the ability of households to borrow, public policies affecting housing markets • Mac. Lennan and Williams, 1992: affordability is “a term concerned with securing some given standard of housing (or different standard) at a price or a rent which does not impose, in the eye of some third party (usually the government) an unreasonable burden on household incomes”.
Literature review • Various housing affordability measurement approaches used in literature such as (1) Housing Cost (2) Residual Income (3) Composite Approach (4) Budget standard method (5) Quality adjustment approach and (6) Poverty Line Method • Ratio approaches commonly used in developing countries (Li, 2014. , Conrad, D A. , 2017, Sari. , & Khurami, 2018) compared to residual approaches used in developed countries, largely due to data constraints and lack of long-lasting research Ratio Approaches Method Criteria Advantages (+) & Weakness (-) Housing Cost (Kutty, 2005; Gan & Hill, 2009; Tang 2017) Ratio approach requires 30% of income as benchmark for housing affordability +Ease of application, Globally accepted & Measure of actual household expenditure on housing relative to actual income -Insensitive to different household characteristics Residual Income Haffner, 2013) Residual income must allow the household to afford consumption of non-discretionary (non - housing) goods and services +Indicates the consumption potentials of a household in absolute terms after paying for housing related costs. - Does not present a more comprehensive view of housing affordability challenges facing different household types (Heylen, &
Literature review Author/Year Data (Country) Approach Methods Key findings Sari & Khurami (2018) Survey of Income and Living Conditions of Turkish Institute 2006, 2009 & 2014 (Turkey) Ratio, residual & Subjective approaches Descriptive Analysis OLS Weak agreement between different approaches in identifying affordability problem in Turkish context. Promising option is for subjective approaches in understanding the issue of housing affordability. Conrad & Looby (2017) Household Budgetary Survey 2008/2009, interest rates (Trinidad & Tobago) Expenditure Income Ratio Descriptive Analysis Over 80% of low and middle income household cannot afford housing at current market prices and interest rates. Ezebilo (2017) Rental on homes & property, location of house, number of bedrooms & house type, public salary scale (Papua New Guinea) Ratio approach and median multiple indicator OLS Housing Affordability index of 3. 4. House rents also influenced by other factors like bedrooms & location. Tang (2017) Two datasets. Continuous Recording of Housing Association new lettings. Survey of Households below Average Income, (England) Rent to income ratio & residual income (poverty line & budget) Descriptive Rent-to-income ratio showed housing association rents were affordable. Based residual approach affordability problem exists in nearly half of the housing association in London. to
Data and methods • Data sources • Solomon Islands Government Public Service Rental Scheme • 2019 Public Sector Salary Structure • Methods • Quantitative, descriptive analysis • Compute rental-income ratio (both before and after tax)
Preliminary results: Public service rental scheme • Rental price is above the 30% income ratio threshold across the salary scale indicating rental unaffordability • Rental prices are unaffordable both before and after tax • Thus, waivers are granted in addition to the rental entitlement to meet the market rates. Source: Rental data from Ministry of Lands, Housing and Survey & Public Sector salary data from Ministry of Public Service, 2019.
Conclusion and plan § Rental unaffordability seen across the public sector § Rental unaffordability exists both before and after tax across all salary scales. § Plan: § Explore other housing affordability measures § Further analysis using detailed HIES 2012/13 data
Policy Implications § Establish a legislative policy to guide market rental via set up of Housing Regulatory Body § Review of Labour Act especially the housing allowance rate § Inform National Housing Policy discussions
THANK YOU griffith. edu. au/asia-institute/our-research/south-pacific-centre-central-banking
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