Unaffordability

Unaffordability refers to a situation in which individuals or households cannot reasonably access goods or services at prevailing prices given their income or available credit. It is commonly discussed in the contexts of housing, healthcare, education, utilities, and other essential needs, where price levels or financing terms exceed what a typical household can sustain without compromising other necessities. Unaffordability can arise even in economies with relatively high average incomes if price growth outpaces earnings or if credit conditions tighten.

The phenomenon is most visible in housing markets, where high prices and rents relative to income can push households toward crowding, borrowing beyond prudent limits, or delaying entry into the market. It also appears in other sectors when out-of-pocket costs rise, when public services become more expensive, or when debt burdens from student loans or medical expenses absorb a large share of income. Unaffordability is influenced by macroeconomic factors such as inflation, interest rates, and wage growth, as well as structural factors like housing supply constraints, zoning policies, and income distribution.

Common indicators include price-to-income and rent-to-income ratios, housing or cost-of-living affordability indices, and measures of the share of income spent on essentials. These metrics help compare affordability over time and across regions but may be affected by methodology and coverage.

Policy responses aim to improve affordability by expanding supply, increasing targeted assistance, and enhancing incomes. Approaches include housing development and reform of land-use rules, subsidies or vouchers for low-income households, wage and employment-structural policies, and, in some cases, price controls or financial regulation.