# Annex 2: Other Measures of Housing Affordability

This annex provides a summary of less commonly used measures of housing affordability that target specific characteristics of affordability.

**Norm rent.** The Canada Mortgage and Housing Corporation distinguishes between those who _choose_ to spend more than 30 percent of their income on housing and those households who have no alternative. This is achieved by applying a ‘norm rent income’ value which is used as the low-income cut-off (Gabriel et al. 2005). A household is said to be facing affordability problems if it spends more than 30 percent of its income on housing _and_ its income falls below the norm rent income required to rent an average dwelling that is suitable (in terms of the number of bedrooms) and adequate for that household’s purpose (CMHC 1991).

**Demand-supply mismatch approach.** This approach compares the number of households with incomes at or below a particular level with the number of rentals with rents that are affordable at 30 percent of the threshold income. Threshold incomes vary with household size and threshold rents vary with number of bedrooms. The difference between the number of households at or below the adjusted income thresholds and the number of rentals at or below the adjusted rent thresholds is considered a measure of the mismatch between the supply and demand for affordable housing (Belsky, Goodman, and Drew 2005). Typical thresholds are a defined fraction of an area’s median family income (e.g., 30, 50, 80, and 120 percent), income quartiles or quintiles, or some multiple of the minimum wage.

**Housing Wage.** Introduced in the U.S. by the National Low Income Housing Coalition (NLIHC), the housing wage is the amount of money a household must earn in order to afford a rental unit of a range of sizes (0, 1, 2, 3, and 4 bedrooms) at the jurisdiction’s Fair Market Rent (FMR).<sup>28</sup> This is based on the affordability standard of paying no more than 30 percent of income for housing costs. NLIHC’s Out of Reach report also provides comparisons of the annual equivalent of the housing wage to the local area’s median income as estimated from HUD (NLIHC 2019).

**Housing Affordability Index.** Housing affordability indices are widely used by the mortgage lending and real estate industries to assess the affordability of the residential sales market, based upon prototypical housing costs, primarily for potential homebuyers. The derived indicators allow for two or more points in time to be compared to determine if, on average, dwellings for sale have become relatively more or less affordable. While useful as a descriptive indicator of affordability, relative approaches do not generally provide a normative standard. They cannot be used to assess how many, and which kinds of households, can and cannot afford which properties for sale, or for that matter, the affordability stresses of owneroccupiers in their current dwellings.

**Amenity-Based Housing Affordability Index.** Fisher, Pollakowski, and Zabel (2009) developed the Amenity-Based Housing Affordability Index based on the rationale that a housing affordability index should take location factors into account because the goal of housing affordability policy should not only be to provide shelter, but also to supply units that are accessible to jobs, education, and other amenities. This index measures affordable housing stock in a given area for families within a given income range. From their application of this index in the Boston metropolitan area for families earning 50-80 percent of

> 28 In the U.S., the rent standard commonly used is HUD’s fair market rent (FMR). This standard is typically the 40th percentile rent of recently rented apartments within an entire metropolitan area or of non-metropolitan areas of a state.

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