The Institute for Urban Economics presents the research, the purpose of which was to update the housing affordability monitoring data of the main indicators, as well as to expand the set of assessed housing affordability indicators that would take into account the actual level of housing provision, in addition to the median income level of the population
Starting from 2020 across Russia and even earlier in the most active housing markets of the major Russian metropolitan areas, there has been a downward trend in fundamental housing affordability (relative to median and average incomes, housing is becoming more expensive). On the one hand, this leads to a gradual reduction in housing consumption, and also limits the possibilities for improving the living conditions of citizens (the spaciousness of accommodation and the quality of housing, as well as the environment), and on the other hand, it can create incentives for the development of competition in housing construction (after all, the struggle for consumers in such conditions intensifies).
This publication presents for the first time additional assessments of housing affordability, which demonstrate a significantly lower level of housing affordability (both fundamental and those, which take into account mortgage affordability) when moving from assessments of the affordability of purchasing housing for a three- person household relative to the 18 sq. m per person (54 sq. m for a three-person household) to the average housing provision per person (in Russia in 2022 - 28.2 sq. m). This suggests that the availability of purchasing conventional standard housing with an area of 54 sq. m has not only been declining in recent years, but the very parameters of such “affordable standard housing” are increasingly different even from the average parameters of the current housing provision (for example, 18 sq. m per person, or 54 sq. m for a three-person household, more or less available: the price to income ratio is 3.9 across the Russian Federation, but 28.2 sq. m per person, or 84.6 sq. m for a three-person household, is no longer available: the price to income ratio is 6.1 across the Russian Federation).
The implementation of mortgage programs with state support since 2020 so far allows citizens with average and above-average incomes and savings to purchase housing, taking into account the acquisition of additional square meters and the sale of existing housing. However, the opportunities for citizens with below average incomes to get mortgage housing loans are limited, since their absolute income does not allow them to service mortgage loans without reducing their residual income below two subsistence minimums per person.
The second important aspect is the high systemic risks for the housing and mortgage markets in the future, because of government preferential mortgage programs cancellation, which will only be possible with the risk of a surge in prices and a contraction in market demand for housing.
Thus, as noted in earlier publications, the largest housing markets in Russia have entered a new cycle, which is characterized by relatively low fundamental housing affordability (rather than high affordability, as was the case during the previous 10 years), despite the still small average size of purchased residential units. Purchasing of more spacious housing, both today and in the future, will be available to groups of citizens with steadily growing incomes that are significantly higher than the average level.
In the medium and long term, the priority of government policy in the field of increasing housing affordability, in our opinion, should be to support the development of alternative forms of housing consumption that are not associated with an active increase in the volume of long-term debt obligations of citizens. Such support should be focused primarily on citizens with incomes below average, including low incomes, and should be aimed at developing institutional rental housing (commercial, non-commercial, with the right to buy, etc.) and housing cooperation in urban and rural areas, and in small towns - for the development of individual housing construction.