the house is not affordable even to a household earning USD 20,000. And yet, the PIR of 2.5 would indicate that it is affordable.

Like the EIR, the PIR is commonly used due to its simplicity. However, it also has limitations. First, it is focused on for-sale housing; the correlation to rental prices is not direct. Second, it does not take into consideration variations in access to housing finance or financing terms, which directly impact a household’s purchasing power. While recognizing the limitations of the two ratio measures discussed above (i.e., EIR and PIR), it must be acknowledged that they are simple to use and are relevant indicators of affordability at the _aggregate level_ , both over time and across markets. However, caution is advised when using them in their current form to assess affordability at the _household level_ (Herbert, Hermann, and McCue 2018).

# 3.4 Data Resources

The approach used for measuring housing affordability in a specific location depends heavily on the availability of data at the market and household levels. This is often an obstacle to creating nuanced affordability measures and criteria for housing programs. For the purposes of measuring affordability in the developing country context, the most likely sources of information include national censuses, household income and expenditure surveys (HIES), and customized housing surveys. These data sources vary in availability, quality, and frequency from country to country.

**_National Censuses._** Almost every country conducts a national census on a regular basis (e.g., every 10 years). Data points related to the housing sector in censuses commonly include population, basic demographics, number of households, and household size. In some cases, the census includes a specific housing module that may include data on the number of housing units, housing type, housing quality, and tenure. Typically, housing income and expenditure, housing rents and prices are not collected as part of a national census in developing countries, making it unlikely that housing affordability analyses can be performed with the data.

**_Household Income and Expenditure Surveys (HIES)._** The general objective of an HIES is to identify household income and expenditure patterns on a comprehensive range of goods and services, including housing. It may also cover a substantive amount of information on housing characteristics such as the type and quality of housing, tenure, and access to services. Such surveys are used to estimate poverty and income distribution variables and are often conducted on a periodic basis (e.g., every 3-5 years).<sup>14</sup> Notably, they are carried out on a sampling basis, and hence are limited in level of representativeness.

There are difficulties in collecting data on both income and consumption/ expenditure in household surveys. Income is a sensitive issue for many respondents, and non-responses or misreporting of some income components may be significant. In developing countries, high informality and a prevalence of self-employment or own-account workers also make accurate income data collection very difficult. In fact, in many developing countries outside Latin America, these surveys are limited to household expenditure data.

> 14 The Living Standards Measurement Study (LSMS) is a HIES established by the World Bank in 1980 that offers data for a subset of Bank client countries.

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