Can we afford to rent a house in a location with good civic infrastructure, including good roads, better health, and better education facilities? How far will it be from our workplace(s)? How much time will we have to spend in commute? These are some of the questions every migrant household faces while moving to a new city.

At the centre of these questions is the problem of housing unaffordability. The United Nations Human Settlements Programme or UN-Habitat, the UN agency for human settlement, provides an operational definition calculating unaffordability for housing as a net monthly expenditure on housing cost (rents or mortgage payments) that exceeds 30 per cent of the total monthly income of the household.

In other words, housing expenditures of more than 30 per cent of monthly income end up infringing on expenses dedicated to other basic needs, and households are forced to reduce expenses for non-housing needs.

Steffen Wetzstein, a political economist at the University of Applied Sciences Erfurt, Germany, found that housing-related household expenses are rising faster than salary and wage increases in many urban centres around the world. He termed it a Global Urban Housing Affordability Crisis, a crisis warranting urgent interventions by governments.

Let us look at the urban housing affordability status in India, which houses the second largest urban population (461 million) and five megacities. With the rapid growth of the urban population, the need for affordable housing has also grown proportionately.

However, the supply of affordable housing stock has consistently been lacking in the cities, leading to the ever-increasing supply-demand mismatch. A significant indicator of this is the presence of informal housing and slums across Indian cities.

RBI survey

A Reserve Bank of India (RBI) residential asset price monitoring survey (2019) across 13 cities reported worsening housing affordability as the house price-to-income (HPTI) ratio increased from 56.1 in March 2015 to 61.5 in March 2019.

HPTI ratio is an affordability indicator calculated as a ratio of median house price to median monthly household income. Simply put, an HPTI ratio of 61.5 implies it takes 61.5 times the median monthly income to cover the median house price. To put this number in perspective, the benchmark HPTI proposed by the UN-Habitat is below 36, beyond which housing becomes unaffordable. The survey also reported that Bhubaneswar is the most affordable city, with an HPTI of 54.4, and Mumbai remains the least affordable city, with an HPTI of 74.4.

Another RBI study in 2018 attempted to calculate the affordability status of different household groups based on their income and house prices across 49 Indian cities. The study observed that the Economically Weaker Section (EWS) households (annual income up to ₹3 lakh) and Lower Income Group (LIG) households (annual income between ₹3-₹6 lakh) could afford to buy a new house in only five of the 49 cities.

Moreover, the Middle Income Group (MIG) households (annual income between ₹6-₹12 lakh) could afford a house in only nine of the 49 cities, and Higher MIG (annual income more than ₹12 lakh) households could afford a house in 18 of the 49 cities.

So, the affordability issue severely restricts the accessibility to housing for the urban migrants in terms of the selection of cities as the low-income households (EWS and LIG) struggle to find affordable housing in the formal housing markets.

There is an inherent need to reconceptualise the land use regulations and urban planning systems while centering housing affordability issues within urbanisation.

The writer is Assistant Professor of Political Science, Department of Humanities and Social Sciences, IIT, Palakkad

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