Affordable_homeownership

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IJHMA 3,1 38 International Journal of Housing Markets and Analysis Vol. 3 No. 1, 2010 pp. 38-52 # Emerald Group Publishing Limited 1753-8270 DOI 10.1108/17538271011027069 Received 7 August 2009 Revised 11 September 2009 Accepted 1 October 2009 Affordable homeownership policy Implications for housing markets Sock-Yong Phang School of Economics, Singapore Management University, Singapore Abstract Purpose – Affordable homeownership is a policy that is often accorded a great deal of policy attention by governments of many countries. This paper aims to examine the market implications of setting a housing price to income ratio target for a market segment by the government. Design/methodology/approach – The policy requires active intervention by the government with regard to the targeted sector. The paper uses a simple model of the housing market with a homeownership affordability target to derive the market implications of such targets. Findings – In the presence of uncertainty and resource constraints, the objective of homeownership affordability is achieved for the targeted group at the expense of greater volatility in residential construction activity. When the size of the targeted sector is significant in size, there are spillover price and crowding out effects on the non-targeted housing market segment. Research limitations/implications – This results in political pressure on the government to expand homeownership affordability targets to increasing segments of the population. Housing price to income ratios tend to be fairly constant over time and across targeted groups, the housing supply is relatively price inelastic and the income elasticity of housing demand is less than one. Practical implications – The Singapore government intervenes extensively in the housing sector to ensure homeownership affordability, with a resulting homeownership rate of 91 percent for the resident population. The above hypotheses regarding the implications of setting housing price to income ratio targets are tested using the Singapore housing market. Originality/value – This paper adds to the literature by analyzing the market implications of setting homeownership affordability targets in the context of a targeted housing segment. Keywords Housing, Private ownership, Pricing policy, Market forces, Singapore Paper type Research paper Introduction: homeownership as policy objective The promotion of homeownership is often accorded a great deal of policy attention by governments of many countries. The benefits as well as the costs of home ownership have been the subject of many studies. Atterhog (2005) classifies the advantages as those relating to: . the dwelling itself – ownership dwellings are typically larger and of higher quality; . accumulation of wealth as home ownership is often regarded as a long term investment; and .
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