Affordability

Affordability refers to the degree to which individuals or households can obtain goods, services, or experiences without compromising essential needs. It depends on both the price of the item and the buyer’s income and resources. The term is widely used for housing, but also applies to healthcare, education, energy, transportation, and consumer goods. In housing, affordability is commonly defined as housing costs that do not exceed a share of income, with 30 percent often used as a standard threshold.

Measurement and indicators vary by sector. For housing, price-to-income ratios, housing affordability indices, and the share of income spent on housing are common metrics. For other goods and services, affordability can be assessed through budget shares, wage benchmarks, or affordability gaps. Data typically come from government statistics, housing authorities, and market surveys, and regional variation is large.

Causes and dynamics are shaped by income levels, prices, financing conditions, and the supply of affordable options. Rising prices, stagnant wages, higher interest rates, and limited supply of affordable housing or essential services tend to reduce affordability. Policy can influence affordability through zoning and development regulation, subsidies or vouchers, wage and employment policies, and programs that improve energy efficiency or reduce transaction costs.

Policy and debates center on how best to improve affordability, often requiring a mix of supply expansion, income support, and targeted subsidies. Critics warn that affordability metrics can misstate lived experience or impose fiscal costs, and that regional variation means one-size-fits-all solutions are ineffective.