The Median multiple or Median house price to income ratio is a
housing indicator used to indicate the
affordability of housing in any given
community
A community is a social unit (a group of living things) with commonality such as place, norms, religion, values, customs, or identity. Communities may share a sense of place situated in a given geographical area (e.g. a country, village, tow ...
. The Median house price to income ratio WAS the primary indicator H1 of the 1991 World Bank/UNCHS Housing Indicator system. It was subsequently used as a measure of affordability by the UN Commission for Sustainable Development, the
National Association of Realtors
The National Association of Realtors (NAR) is an American trade association for those who work in the real estate industry. It has over 1.4 million members, making it one of the biggest trade associations in the USA including NAR's institutes, so ...
, State of the Environment 2003 Tasmania; and the Mortgage Guide UK along with many other organisations.
The indicator has been popularised by Demographia International, and was called the 'Median multiple' from their second comparative international survey in 2006.
The median multiple is the ratio of the median house price by the median gross (before tax) annual
household income
Household income is a measure of the combined incomes of all people sharing a particular household or place of residence. It includes every form of income, e.g., salaries and wages, retirement income, near cash government transfers like food stamp ...
. This measure has historically hovered around a value of 3 or less, but in recent years has risen dramatically, especially in markets with
public policy constraints on land and
development
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.
The median multiple ratio has an important flaw in that it fails to account for the critical affordability component of mortgage interest rates. Mortgage interest rates are a major impacting factor on affordability as most real estate purchasers utilise mortgage finance to purchase real estate. In 1991 when the World Bank announced the median multiple as the primary affordability indicator, global mortgage rates were around 10%p.a. Since then interest rates have generally been on a long term downward trend. Whilst mortgage rates may not, stay below 10% using the median multiple in isolation to assess affordability has proven over a long period to have been a misleading affordability measure.
Table
The International Housing Affordability Survey uses the following table to determine affordability ratings:
See also
*
Affordable housing
Affordable housing is housing which is deemed affordable to those with a household income at or below the median as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affo ...
*
Inclusionary zoning
Inclusionary zoning (IZ), also known as inclusionary housing, refers to municipal and county planning ordinances that require a given share of new construction to be affordable by people with low to moderate incomes. The term ''inclusionary'' zon ...
*
Land-use planning
Land use planning is the process of regulating the use of land by a central authority. Usually, this is done to promote more desirable social and environmental outcomes as well as a more efficient use of resources. More specifically, the goals ...
*
Land titling
*
Real estate
Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...
References
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Affordable housing